NZD/USD bounces off four-week low to rise past-0.6600 on RBNZ status-quo

  • NZD/USD jumps nearly 50 pips as the RBNZ refrains from any dovish attempts to counter the virus woes.
  • RBNZ keeps interest rate unchanged at 0.25%, Large Scale Asset Purchase (LSAP) at NZD100 billion.
  • Trade sentiment remains sour as Japanese traders’ return from long weekend reacts to market risks.
  • US PMIs, the second version of Powell’s testimony will join risk catalysts to direct near-term pair moves.

NZD/USD surges almost 50 pips to refresh the intraday high of 0.6647, currently around 0.6633, after the RBNZ decision on early Wednesday. With New Zealand’s central bank defying bearish expectations, the kiwi buyers portray pullback from the multi-day low.

Although no change to the benchmark interest rate of 0.25% was widely anticipated, market players expected dovish remarks and/or any alteration to the LSAP.

Read: RBNZ leaves OCR unchanged at 0.25%, maintains QE at NZD100 billion

The risk reset also favors the pair’s recovery moves. With the US Congress passing a stop-gap funding bill, market players expect overcoming of the stimulus deadlock. However, the latest coronavirus (COVID-19) outbreak on Brooklyn and the Sino-American tension can keep attacking market sentiment.

Earlier in the week, New Zealand’s Prime Minister (PM) Jacinda Ardern scaled back some of the virus-led restrictions of the nation except from the epicenter Auckland. Though, tension between Washington and Beijing, recently over the South China Sea, has been the taxing the risk-tone sentiment.

While portraying the mood, S&P 500 Futures trim the early-day losses to regain 3,300 whereas stocks in New Zealand gain around 1.0% following the RBNZ decision.

Having witnessed the initial market reaction to the RBNZ’s move, actually no moves, NZD/USD traders will keep eyes on the risk catalysts ahead of the US session where the American calendar can entertain the traders. While the US PMIs may keep the US dollar strong, any surprises from the Fed Chair Jerome Powell, during the second round of his testimony, might not refrain from dragging the greenback gauge (US dollar index, DXY) from a two-month high.

Technical analysis

Sustained trading below the 50-day SMA level of 0.6640 drags the NZD/USD pair towards an ascending trend line from June 30, currently around 0.6555.

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