Market Beat: New Zealand Dollar Jumps as RNBZ Cuts Interest Rate

August 11, 2016

Unexpectedly NZ interest rate cut and hawkish BOJ statement has made some trends today.

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Market Beat: New Zealand Dollar Jumps as RNBZ Cuts Interest Rate

This article is originally referred from Daily FXGlobe

The Japanese Yen and the U.S. Dollar were in the center of attention in early trading on Wednesday as investors were looking forward to the RBNZ’s rate decision.  The Dollar started out the session with a sharp drop, and the currency finished the session close to its lows compared to its major counterparts. The Yen continued higher after Tuesday’s rebound as it remains the strongest among the G10 currency, following the unexpectedly hawkish BOJ statement.

Commodities were mixed again as oil resumed its recent downtrend following the negative U.S. data release. Precious metals finished the day close to unchanged after a very strong morning session, as both gold and silver turned lower in late trading. The Australian Dollar continued higher throughout the day and it also got a small boost following the surge by the New Zealand Dollar after the U.S. close. The Pound was under pressure yet again, and it remains the weakest currency among the majors.

GBP/JPY (current price: 131.79)

The pair continued lower again as the weakest and the strongest currency both remain firmly in their trends for now.  The British Housing Price Index showed weakness again, as the real estate market is still one of the most affected segment by the Brexit fears. Japanese Industrial Activity was stronger the expected helping the Yen in gaining ground against its major peers on Wednesday. The long-term trend is still bearish, as the recent correction got almost erased in two weeks.

Our assessment: GBP/JPY is trading near the 130 level right above the lower boundary of the declining long-term channel, with the multi-year low not far away around 128.

GBP/JPY back below the 133.50 level on the Daily Chart, Created by FxGlobe MT4

GBP/JPY back below the 133.50 level on the Daily Chart, Created by FxGlobe MT4

EUR/USD (current price: 1.1186)

The Euro gained ground for the third day in a row compared to the Dollar, as the common currency is now stronger than it was before Friday’s U.S. employment report. Investors now think that despite the better than expected indicators, the FED probably won’t raise interest rates later this year, as international worries still mean dangers even for the strong U.S. economy. The pair rebounded off the 200-day MA yet again this week, and traders will likely focus on the crucial indicator in the coming weeks as well.

Our assessment: EUR/USD is still above the prior declining trend channel, and a new uptrend might start in the coming days if global markets remain bullish.

EUR/USD still in a broad neutral trading range on the Daily Chart, Created by FxGlobe MT4

EUR/USD still in a broad neutral trading range on the Daily Chart, Created by FxGlobe MT4

NZD/USD (current price: 0.7270)

The pair rocketed higher after the widely expected decision by the RBNZ to cut the benchmark interest rate to 2% from the previous 2.25%. The more hawkish monetary statement of the central bank led to a strong rally in the currency, as we expected, copying last week’s action in the Australian Dollar. The pair rose above the 0.7300 level that we have been monitoring recently after the decision, and further upside is possible if global risk appetite remains strong.

Our assessment: The cross broke out of relatively narrow range after the crucial RBNZ announcement, and the recent correction might be over following the break-out this morning.

NZD/USD after hitting 12-month high on the Daily Chart, Created by FxGlobe MT4

NZD/USD after hitting 12-month high on the Daily Chart, Created by FxGlobe MT4[

WTI Crude Oil (current price: $42.10)

Oil rebounded from the widely watched $44 resistance on Tuesday, and the crucial commodity declined sharply yesterday getting close to the 200-day MA and the key support near $41.25. The declining trend channel that dominated trading since early June is still intact, and a re-test of the prior lows near $39 is possible following the recent correction. U.S. Crude Inventories rose unexpectedly last week by 1.1 million barrels and that led to the strong sell-off yesterday during the afternoon session.

Our assessment: Oil is still trading in a clear downtrend following a historic rally that took the commodity higher by 85% between February and June. The 200-day MA might serve as the most important indicator in the coming month for WTI Crude.

Oil possibly resuming the dominant downtrend on the Daily Chart, Created by FxGlobe MT4

Oil possibly resuming the dominant downtrend on the Daily Chart, Created by FxGlobe MT4

Economic Releases

Forex markets are up for another calm session after a more volatile Wednesday, as there will be less important releases coming out globally. Japanese markets will be closed because of a public holiday, and that might lead to low volatility in the connected pairs. The Canadian Housing Price Index could have a material impact on the Canadian Dollar, while U.S. Import Prices and the weekly Unemployment Claims number might influence the Dollar. New Zealand Retail Sales will also be released during the evening session.

Original Source: Daily FXGlobe

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