RBNZ To Unleash Stimulus
Rowan Crosby • 2 min read
The NZD/USD might be pushing higher today, but looking ahead this week, the RBNZ is getting set to try and loosen their monetary policy even further.
Central bank Governor Orr is set to announce new monetary stimulus at this weeks meeting of the RBNZ with the goal of lowering borrowing (cheap loans) for major banks. This is something we’ve seen across the globe and it is a way to stimulate the economy through encouraging lending.
At the same time, there is also the possibility that the RBNZ tries to take rates negative at some point in the future. There is no expectation for rates to go negative this week, but it is something that is increasingly on the cards. Rates are currently at the record low level of 0.25% and they are expected to stay that way on Wednesday. But they are expected to announce the $100 billion bond purchase program in the same fashion as the RBA did only last week.
Even though COVID is mostly under control in New Zealand (just like Australia) and the economy is bouncing back, the central banks continue to throw everything they can at boosting the economy.
If rates are to go negative it will most likely happen next year, but what we do know is that we should be expecting a prolonged period of ultra-low rates.
Looking to the charts now and we can see the NZD/USD is pushing higher today following on from the moves of last week.
As we can see below, price is now holding under the key resistance level at 0.6800.
Given that the stimulus measures have been clearly laid out, there is a high chance it is priced in already. If risk assets keep moving, we should be expecting a genuine attempt at this 0.6800 level.
A break and hold would mean we could see another leg higher. 0.6765 is the bottom of this pullback and a break under that could see price drop away. Similarly, we can look for a failure below 0.6800 for a short opportunity.