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NZD in focus ahead of RBNZ rate decision


28 June 2018

There is a lot of heat on the upcoming interest rate decision for New Zealand; not because of the fact that  markets are expecting it won't change, but more because of the questions that can be asked afterwards, and the following monetary policy information. With the current state of economic data it seems likely that the Reserve Bank of New Zealand will be acting in a dovish manner and may even look to further extend the dollar pain pushing it lower at present with this opportunity. It does feel that no matter what happens in the next few months the RBNZ is not going to be looking to move rates until next year. With that in mind markets will be poised to whack it lower if the RBNZ is dovish and I would be surprised to hear any hawkish comments after the recent trade balance data.

Looking at the NZDUSD on the charts and it's clear to see the bears are taking large swipes at every chance at present. Support at 0.6755 is likely to be the next major target in this instance, however I would also be watching the potential trend line that is in play and the potential for it to act as dynamic support. On the off chance the RBNZ is hawkish then resistance levels can be found at 0.6819, 0.6856 and 0.6898, but I would still find that quite surprising given the spate of data we've had as of late.

Crude oil has been looking stronger than ever after the most recent oil inventory data out of the US surprised the markets. A drawdown of -9.89M (-3M exp) was recorded, with gasoline and distillate inventories showing less than expected surpluses, as a result oil has jumped back up to levels not the end of May as a drawdown this large has not been seen since 2016. With all the talk of Iran sanctions and trying to stop the oil pumping it may be in the best of interest of global consumers like China and India to keep taking it as oil prices remain elevated. This will of course put pressure on Trump as well as he has wanted to keep oil prices reigned in to keep consumers and businesses happy in the long run.

On the charts it feels like the bulls are certainly in control at present, despite the high USD which should normally have an impact on oil markets. Oil is currently flirting with resistance at 72.44 and it looks likely that it could extend further to the next level of resistance at 74.17. Support levels can also be found at 71.28 and 69.38, with dynamic support found at the long term bullish trend line that is in play also. I also expect the 20 day moving average to rise up the chart now, and wouldn't be surprised to see some technical trades play off it if we also creep lower in this scenario. However, with the current market climate I expect markets to remain bullish in the interim.  

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