Once again, the Kiwi is flying high, hitting 0.7000 for the first time
in 2yrs. The move stemming from reports overnight that the NZ Finance
Minister sent a letter to the RBNZ to potentially consider adding house
prices to the central banks remit. As such, given the current backdrop
with NZ house prices surging to historically high levels, the suggestion
is that such an addition would lower the prospects of further stimulus,
subsequently, NZ 10yr yields rose 10bps, now above their Aussie
counterparts.To get more news about WikiFX, you can visit wikifx official website.
The RBNZ provided an initial response in which they noted that the
central bank already looks at house prices concerning financial
stability risks. While also pushing back on the extent to which monetary
policy can address the issue. Further commentary is expected from the
RBNZ later today with the financial stability report due at 20:00GMT and
Governor Orr to speak at 22:00GMT thus NZD implied vols have picked up.
Upside Looking Stretched with TWI Firmly Above RBNZs Projection
However, with NZD on course for its best month since Nov 2018, rising
5.5%, another concern for the RBNZ is the surge in NZD TWI, which is now
firmly above its recent projection in the November MPS as the chart
shows below. In turn, NZD valuations in the short-term appear stretched
on the upside thus risk-rewards are moving in favour of a pullback.
NZD/USD: Near-term resistance is situated at the psychological 0.7000
handle. While a move above opens up 0.7040, USD short squeezes are still
a risk, as was seen yesterday. In turn, initial support on the downside
is situated at 0.6920 with a move below putting 0.6900 and 0.6880 in
focus.
