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When is the RBNZ and how it could affect NZD/USD?

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Early Wednesday at 02:00 GMT market sees the key monetary policy decision by the Reserve Bank of New Zealand (RBNZ). Having initially turned down the bears New Zealand’s central bank is anticipated to adopt a dovish tone amid the latest coronavirus (COVID-19) resurgence. However, Governor Adrian Orr and the company isn’t famed for pleasing the bears, which in turn makes today’s event as an important one. It should be noted that the RBNZ is widely anticipated to keep the benchmark interest rate unchanged at 0.25% but may signal changes to its Large Scale Asset Purchases (LSAP) during the monetary policy meeting.

Ahead of the event, Australia and New Zealand Banking Group (ANZ) said,

As we have said all week, we expect the RBNZ’s tone to be very dovish, and for a repeat of its “least regrets” do-what-it-takes approach. We also see good grounds for the MPC to signal an intention to flex the pace of the LSAP more to help flatten the yield curve, and to reiterate that foreign asset purchases remain an option (albeit not a core one), both of which would weigh on the Kiwi.

Also joining the bears’ league is TD Securities that said,

The RBNZ is expected to keep the cash rate on hold at 0.25%. Despite firmer data outcomes, we expect the Bank will continue to highlight its strong intentions for deploying negative rates if required after March 2021.

How could it affect NZD/USD?

With the COVID-19 resurgence risk dragging the Antipodeans down, NZD/USD stays heavy near the two-week low, down 0.18% around 0.6620, before the RBNZ on Wednesday. Also exerting downside pressure on the pair could be uncertainty surrounding September month election in New Zealand. In doing so, the bulls ignore receding virus-led restrictions from the ex-Auckland part of the Pacific major.

FXStreet’s Dhwani Mehta says, “The risk tone and the resultant sentiment around the US dollar could likely influence the NZD/USD reaction to the RBNZ's decision. Although the bias appears to the downside amid an expected dovish forward guidance.”

Technically, a downside break of a one-month-old ascending trend line needs validation from a daily closing below the 50-day EMA level of 0.6620 before targeting the monthly bottom near 0.6600. Alternatively, the pair’s pullback moves can’t be taken seriously unless crossing the previous support line, currently around 0.6680/75.

Keynotes

NZD/USD Price Analysis: Bears on verge of test of trendline support

RBNZ Preview: Dovish forward guidance to down the Kiwi?

About the RBNZ interest rate decision and rate statement

The RBNZ interest rate decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the NZD. The RBNZ rate statement contains the explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.

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