The NZD/USD Remains Bullish

The standout performer yesterday was the NZD/USD and the bullish trend looks like it is set to continue today.

It was the RBNZ that was the real spark for the buying on Wednesday as it now appears less likely that interest rates would be going negative.

Yesterday, we heard the RBNZ introduce a new lending scheme for banks and also reiterated the stimulus would continue. However, they also made note that it was not as important as it might have been not that long ago.

The markets are still predicting that rates will be cut and they could fall in the same fashion as the RBA to around 0.1-0.15% in early 2021. The cuts that had been talked about that would see the cash rate go negative are now a lot less likely.

The reality is that inflation has been forecast to increase from 0.3% to 0.9%, while jobs will be soft for a while, before picking up.

Given that the world now has a vaccine on the way, which potentially means borders reopening next year and the signs will be good going forward.

Given that the slated rate cuts might not happen, the NZD/USD broke higher as the news was absorbed and took out the highs at 0.6850.

Price ran as high as 0.6900 but couldn’t get above that level after multiple attempts.

In some ways, this is the first central bank to really turn things around, despite remaining very much dovish.

I think it will be a bit of a balancing act going forward.

For the most part, we can use the key levels to trade off. A break above 0.6900 and hold could be a nice long signal, while if price drops out the bottom through 0.6800, the run is all but over.