NZD/USD Trend at Risk Ahead of RBNZ Rate Decision, Policy Statement

Today at 17:00 ET, the Reserve Bank of New Zealand (RBNZ) is anticipated to leave the Official Cash Rate target unchanged at 2.50 percent for the first time since June 2008.

In April, the RBNZ cut their official cash rate target last night by 50 basis points, as the “world economy deteriorated more than expected” during Q1. Looking to the RBNZ Governor Alan Bollard’s policy statement, it is clear that the central bank has cut back their inflation expectations due to weaker global growth and tight financial conditions. Furthermore, the RBNZ anticipated that the “adverse economic forces generated by the crisis to remain dominant throughout 2009,” with the “timing and extent of recovery” remaining “highly uncertain.” Adding to this bearish sentiment, the RBNZ expected to leave the OCR at or below current levels through the end of 2010, which weighed heavily on the New Zealand dollar at the time.

A reiteration of this bias should do the same this time around, and the confluence of the 38.2% fib of 0.5491-0.6598 and rising trendline support at 0.6175/95 will become the level to watch as a break lower will likely target the 61.8% fib at 0.5914. On the other hand, if the RBNZ strikes a more neutral tone, NZD/USD could continue to make headway toward the June 2 highs near 0.6600. That said, with US equities having trouble breaking their own highs, uneasy risk appetite doesn’t bode well for a rally in FX carry trades.

For more on how to trade the RBNZ rate decision, check out Trading the News.

[I]Source: FXTrek Intellicharts[/I]