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NZD/USD: Bears looking for closes below the 23.6% Fibo and 100-D SMA

  • The NZD/USD recovered from the early Asian session's flash crash lows overnight and rose steadily to the 0.67 handle
  • The levels were unsustainable and the dollar had to give.

Thin liquidity amid a Japanese holiday, algo trading, Apple Inc news and various other factors were cited as causing the drop, but markets have quickly moved on in anticipation of the nonfarm payrolls data due in the US closing session for the week. 

Elsewhere, with a focus on the Fed, interest rates have taken a backseat to the uncertainties on both the economic and political front. Indeed, the economic outlook is delicately placed with downside global risks rising in prominence ad banks are moving towards buffers. Recently, the RBNZ was consulting on proposals to increase bank capital requirements substantially.

Eyes on central banks

"As things stand currently, the possibility of higher capital requirements reaffirms our call that the eventual next move in the OCR will be down – at the dovish end of market expectations," analysts at ANZ Bank explained. 

The RBNZ next meets on February 13, providing an update to its growth and inflation forecasts. "At this early stage, we see no need for Governor Adrian Orr to change his "wait, watch and worry" stance. Analysts at TD Securities expect the OCR to remain at 1.75% through to November 2019, with risks of slippage into 2020 if the Governor insists on keeping the cash rate unchanged through 2019 and 2020 no matter what the data outcomes are," the analysts explained. 

NZD/USD levels

Bears remain in charge at this juncture with the price testing below the 23.6% Fibo at 0.6663. A break of the 100-D SMA again with daily closes will sure up that bias while RSI and various indicators are leaning that way still, supporting the bearish outlook for forthcoming price action.

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