13.05.202008:05 Forex Analysis & Reviews: NZD / USD. RBNZ expanded QE and threatened with negative rates

On its meeting today, the Reserve Bank of New Zealand put significant pressure on the Qiwi: the NZD / USD pair even plunged at the strategically important price level of 0.6000, demonstrating a downward impulse. And although the RBNZ kept all the parameters of monetary policy in its original form, its chairman Adrian Orr voiced an extremely dovish position, surprising many market participants.

It is necessary to recall here that at the end of April the head of the New Zealand Central Bank allowed the buildup of measures to stimulate the economy. According to him, quantitative easing will deal with the consequences of the pandemic much better than negative rates, although this step is also not excluded. Orr then noted that the Central Bank will consider such options in May, having studied the dynamics of key macroeconomic indicators, primarily in the field of labor market and inflation.

Just two weeks after this announcement, the main data on the New Zealand market was published, which, as a match, turned out to be in the green zone. Instead of a predicted recession, the key components of the release, on the contrary, have grown, giving traders hope that the RBNZ will maintain a wait-and-see position. Judge for yourself: according to experts, the unemployment rate in the first quarter was to increase to 4.5%, while in reality it rose only by 4.2%. The growth rate of the number of employees was supposed to fall to -0.2% quarterly, and to 0.7% in annual terms. But instead, the indicators showed significant growth of - 0.7% q / q and 1.6% y / y. The share of the economically active population increased to 70.4% (that is, to the level of the third quarter of last year), and the average level of wages rose by 0.3%.

Against the background of such dynamics, traders planned to hear from Adrian Orr if not inspirational theses, then at least cautious optimism. However, the New Zealand Central Bank did not follow the general market expectations - firstly, the regulator increased the amount of quantitative easing from 33 billion to 60 billion, and secondly, did not exclude the introduction of negative rates in the foreseeable future. Commenting on the decisions made, Orr said that the rate can only be revised downward, while the Central Bank does not plan to tighten its monetary policy over the course of (at least) the next 12 months. He also did not rule out further expansion of QE "if necessary."

This unexpected turn of events surprised traders, after which the NZD / USD pair tested the 59th figure. At the moment, buyers are holding the Kiwi above the 1.6000 mark, but the pair's mood is bearish. In general, it is this price level that will determine the prospects for the pair in the medium term. If the price does not fall below the 60th level, it can rise to the middle of the 61st level.

The determining factors of a fundamental nature will be the events associated with the weakening of quarantine on the island state. The Prime Minister of New Zealand recently announced limiting restrictions that particularly allowed resume in some jobs like hairdressers and bars, as well as a resumption in sports. This is due to a decrease in the recorded new cases of coronavirus infection in the country despite being one of the countries who faced a hard time in the implementation of the quarantine, experts said.

In addition, experts said that the economic indicators will recover quickly enough, subject to the opening of the economy and the absence of a second wave of the pandemic.

That is, with a high degree of probability, the RBNZ this year will be limited to the measures taken. Further expansion of QE and (especially) lowering rates in the negative area have their side effects, so the regulator will resort to such measures only in emergency cases. Awareness of this fact by traders can help the pair to stay above the key level of 0.6000.

Today, the dynamics of the pair will be affected by the speech that will be given by the Fed chairman Jerome Powell, via the online broadcast at the Peterson Institute for World Economy. He will evaluate the recently published US inflation indicators in the context of future monetary policy prospects. If he puts pressure on the greenback, the NZD/USD pair will accordingly receive support and stay above the key price level.

From a technical point of view, the mark of 0.6000 corresponds to the upper border of the Kumo cloud, where if the NZD/USD sellers can overcome it, they will be open to the lower border of the cloud, which corresponds to the price level of 0.5930. But if buyers keep the price above 0.6000, then the pair is likely to rebound to the resistance level of 0.6150, located at the upper line of the Bollinger Bands indicator on the daily chart. Over the past two weeks, kiwi has tested this price barrier several times, but to no avail. However, this target can be considered as the goal of corrective recovery.