Fundamental Analysis:

The New Zealand dollar remained under pressure against baskets of other currencies as investors speculates a rate cut in the coming months. Over the weekend China cut their lending and deposit rates by 0.25% after CPI came in lower on Saturday and last week’s trade figures showed slowing imports and exports.

A Chinese slowdown has a downward effect on the AUD and in turn also NZD. Antipodean currencies will remain pressured as long as demand is weakening in China. 

The market is now starting to take notice of the chance of a rate cut from RBNZ next month. The bank make their next decision on June 10 and now several major investment banks are predicting a rate decrease at that meeting. The OIS swap market is now pricing in a 46% probability of a 25 basis point cut, up from 28% last week. Many banks are predicting two cuts from the RBNZ this year.

Two weeks ago Assistant Governor McDermott made dovish remarks about easing by the RBNZ if demand drops off and inflation dwindles. Since then we’ve seen a poor employment release. Due to these rate cut expectations we are looking to trade into the event over the next four weeks as we expect the Kiwi dollar to depreciate.


Technical Analysis:

Intra-day remains bearish as 21 and 55 EMA is still crossed downward. Also SSRC oscillator indicator signals bearish momentum is still in play. Selling the rips would be a better way for getting into this pair if we get some retracement as the market has been sold all the day long. Am expecting further decline to 0.7261 in the medium term picture.


Tomorrow investors would be monitoring RBNZ Financial Stability Report and Governor Wheeler Speech.

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