The RBNZ is to announce its interest rate decision tomorrow during the Asian session (01:00, GMT) and is widely expected to remain on hold. Currently NZD OIS imply a probability of 98.95% for the bank to maintain an interest level of +1.75%. With unemployment rate on the rise, the inflation rate below the bank’s median target of +2.00% yoy and the GDP growth rate slowing down there seems to be little room for any hawkish maneuvers. Also the wide uncertainty of China’s slowdown and its trade relationships is another factor of worries for the bank. Should the bank prefer a more cautious stance, we could see extensive dovish elements surfacing, weakening the Kiwi, which currently is our base scenario. Should on the other hand the bank prefer to keep its options open, we could see the accompanying statement having a more neutral tone. Please be advised that volatility of Kiwi pairs could extend during Governor Orr’s press conference later on (02:00, GMT). NZD/USD rose yesterday breaking above the 0.6900 (S1) resistance line, now turned to support. Should market start positioning itself for a dovish RBNZ interest rate decision, we could see the pair trade in a rather bearish market. Should the pair come under the selling interest of the market, we could see it breaking the 0.6900 (S1) support line and aim if not break the 0.6860 (S2) support barrier. Should on the other hand the pair’s long positions be favored by the market, we could see it breaking the 0.6940 (R1) and aim for higher grounds.
Pound remains steady, as UK Parliament takes control of Brexit.
The UK Parliament took control over Brexit, as in a vote yesterday night decided to schedule a series of votes on alternative Brexit outcomes. The alternative strategies could include among others a second referendum, keeping the UK in the EU’s customs union a hard Brexit or canceling Brexit altogether. Three ministers of the government resigned in order to back the plan, indicative of the PM losing control over the MPs of even her own side. The first step is expected to be a process of indicative votes, probably on Wednesday, which could also result in a dead end, mind you. On the other hand it should be noted that the process could prove to be a double edged sword, as the possibility of a soft Brexit could throw some hard Brexiteers into Theresa May’s arms, albeit the DUP still does not seem convinced. As all possibilities are still open, uncertainty seems to persist and thus we expect the pound to remain in check until the fog clears somewhat. Cable maintained a range bound movement yesterday, continuously testing the 1.3175 (S1) support line. We could see the pair remaining under pressure and largely maintain a sideways movement today. Cable could prove sensitive to any Brexit headlines tilting the Brexit scale towards the one or other possible outcome, yet at the same time could also prove sensitive (albeit to a lesser degree) to the US financial releases today. Should the bears take control of the pair’s direction, we could see cable breaking the 1.3175 (S1) support line and aim for the 1.3070 (S2) support barrier. Should on the other hand the bulls dictate the pair’s direction, we could see cable breaking the 1.3265 (R1) resistance line and aim for higher grounds.
Other economic highlights, today and early tomorrow
In today’s European session, we get Germany’s GfK Consumer Climate for April while in the American session we get the CB Consumer Sentiment indicator for March and later on the API weekly crude oil inventories figure. As for speakers, please note that Philadelphia Fed President Harker, Chicago Fed President Evans and San Francisco Fed President Daly speak.
NZD/USD
Support: 0.6900 (S1), 0.6860 (S2), 0.6825 (S3)
Resistance: 0.6940 (R1), 0.6995 (R2), 0.7050 (R3)
GBP/USD H4
Support: 1.3175 (S1), 1.3070 (S2), 1.2970 (S3)
Resistance: 1.3265 (R1), 1.3350 (R2), 1.3450 (R3)
