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NZD/USD Recovery Vulnerable To Dovish RBNZ Parliament Testimony

By Kurt Osterberg · On November 28, 2017

NZD/USD extends the rebound from earlier this month, with the pair quickly approaching the November-high (0.6980), but the Reserve Bank of New Zealand’s (RBNZ) Financial Stability Report (FSR) may rattle the near-term recovery in the exchange rate should the central bank cast a dovish outlook for monetary policy.

With acting Governor Grant Spencer scheduled to testify in front of Parliament’s Finance and Expenditure committee, the central bank head may merely attempt to buy more time especially as the coalition government under Prime Minister JacindaArdern pledge to review and revise the RBNZ’s mandate. With that said, Governor Spencer is likely to reiterate that ‘monetary policy will remain accommodative for a considerable period,’ and a batch of dovish rhetoric may ultimately dampen the appeal of the New Zealand dollar as the RBNZ remains in no rush to lift the cash rate off of the record-low.

NZD/USD Daily Chart

Topside targets remain on the radar for NZD/USD as the pair initiates a series of higher highs & lows, while the Relative Strength Index (RSI) appears to be breaking out of the bearish formation carried over from August.

Break above the 0.6940 (61.8% expansion) to 0.6950 (38.2% retracement) region raises the risk of seeing a run at the monthly-high (0.6980), with the next topside hurdle coming in around 0.6990 (50% expansion).

First downside region of interest comes in around 0.6820 (23.6% retracement) to 0.6870 (50% retracement) followed by the 0.6780 (100% expansion) to 0.6790 (50% retracement) which largely lines up with the 2017-low (0.6780).

The British Pound struggles to hold its ground as the Bank of England’s (BoE) Financial Stability Review revealed five of the seven major U.K. lenders passing the latest stress test, and GBP/USD may continue to face near-term headwinds as Governor Mark Carney and board member David Ramsden are scheduled to speak at an event held by the FICC Markets Standards Board (FMSB).