New Zealand Dollar Talking Points
NZD/USD[1] extends the advance from earlier this month to trade to a fresh 2020 high (0.6945) in November, and recent developments in the Relative Strength Index (RSI) indicate the bullish momentum could gather pace as the oscillator breaks above 70 to push into overbought territory.
NZD/USD Rate Clears 2019 High and Triggers Overbought RSI Reading
NZD[2]/USD[3] clears the 2019 high (0.6942) as the US Dollar[4] still broadly reflects an inverse relationship with investor confidence, and the exchange rate may appreciate throughout the remainder of 2020 as major central banks become increasingly reliant on their unconventional tools to achieve their mandate for monetary policy.
Looking ahead, it seems as though the Reserve Bank of New Zealand (RBNZ) will continue to endorse a dovish forward guidance as officials “remain prepared to provide additional support if necessary,” but it remains to be seen if Governor Adrian Orr and Co. will deploy more non-standard measures after launching a Funding for Lending Program (FLP)[5] at its last meeting for 2020 as the central bank appears to be in no rush to implement a negative interest rate policy (NIRP).
In turn, swings in risk appetite may continue to influence NZD/USD ahead of the next RBNZ meeting on February 24 as the Federal Reserve’s balance sheet[6] approaches a record high, and it seems as though the Federal Open Market Committee[7] (FOMC) will rely on its current set of tools to support the US economy as the central bank shows a greater willingness to extend its lending facilities and vows to “increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace.”
Nevertheless, Chairman Jerome Powell and Co.
