Maybank FX Flash: NZD - Strength is Unwelcome - 30 April 2015

NZD:  Strength is Unwelcome

        The RBNZ kept rates on hold at 3.5% this morning, as widely expected. The tone of the accompanying statement is perceived to be dovish. Future OCR cut (if any) will hinge on demand and inflation outlook. The next policy announcement is on 11 June (our base view is for RBNZ to maintain current policy rate at 3.5% for 2015).

        RBNZ accompanying statement is consistent with RBNZ Deputy Governor McDermott’s “The dragon slain?” speech on 23 Apr. Monetary policy is expected to be stimulatory; not currently considering any increase in interest rates; NZD strength amid key export prices failing is unwelcome.

        RBNZ dovish slant (30 Apr) has managed to keep NZD bulls at bay and capped the pair from managing a daily close above the 0.77 levels. While weekly momentum remains mild bullish bias; a daily close above its Apr highs of 0.7745 is required to see the pair take on 0.7810 (200 DMA and 38.2% Fibonacci retracement of 0.8836 – 0.7177); 0.7880 (2015 high). Prefer to fade on NZD strength (if any). Meanwhile interim support seen at 0.7530 (50 DMA); break below could target 0.72 levels.