New Zealand Dollar Talking Points
NZD/USD[1] attempts to retrace the decline from the previous week after testing the June low (0.6923), and the Reserve Bank of New Zealand (RBNZ) Monetary Policy Review (MPR) may sway the near-term outlook for the New Zealand Dollar[2] if the central bank adjusts the forward guidance for monetary policy.
NZD/USD Rate Rebound Emerges Following Test of June Low
NZD/USD[3] appears to be stuck in a defined range as the RBNZ is widely expected to keep the official cash rate (OCR) at the record low of 0.25%, and more of the same from the central bank may produce headwinds for the New Zealand Dollar as board plan “to maintain its current stimulatory monetary settings until it is confident that consumer price inflation will be sustained near the 2 percent per annum target midpoint, and that employment is at its maximum sustainable level.”
However, the RBNZ may start to discuss an exit strategy as Governor Adrian Orr and Co. “expressed greater confidence in their outlook for the economy,” and a shift in the forward guidance may trigger a bullish reaction in the New Zealand Dollar as officials acknowledge “that on current projections the OCR eventually increases over the medium term.”
Until then, NZD/USD may track sideways as it bounces back from the monthly low (0.6923), but the decline from the June high (0.7288) continues to spur a shift in retail sentiment as the exchange rate trades below the 200-Day SMA (0.7064) for the first time since June 2020.
The IG Client Sentiment report[4] shows 52.53% of traders are currently net-long NZD/USD, with the ratio of traders long to short standing at 1.11 to 1.
The number of traders net-long is 16.72% higher than yesterday
