Source: ForexYard
Today at 20:00 GMT we will get the interest rate decision and press conference from the Reserve Bank of New Zealand. The RBNZ is expected to hold rates steady at 2.50% unlike the RBA which lowered Australian interest rates by 25 bp.
Given the headwinds facing the global economy the RBNZ would most likely enjoy loosening monetary policy. However, because of higher inflation the RBNZ may keep interest rates on hold. Currently New Zealand inflation stands at 4.6% y/y. The RBNZ targets inflation between 1-3%.
The NZD/USD should be supported in the near term if some of some sort of compromise comes from this week’s EU economic summit. The 6-month trailing correlation between NZD/USD and EUR/USD stands at 0.80. A correlation closer to 1.00 means the currency pairs move in the same direction. This should help keep the NZD supported versus the USD and the NZD/USD has resistance at the top of the recent consolidation pattern at 0.7840 followed by 0.7980 off of the falling trend line from the August high. Support comes in at 0.7730.
For those traders looking to avoid exposure to the EUR the AUD/NZD may offer just that as the pair has a 6-month trailing correlation of with the EUR/USD of -0.16. This indicates there is a weak relationship between the movement of the two currency pairs. The technical picture for the AUD/NZD shows a triangle consolidation pattern from the November 18th high and the November 25th low. The initial resistance from the pattern is 1.3210 followed by 1.3380 off of the trend line from the yearly high.
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