So clearly there is no illusion as to the RBNZ's August 10th decision. Perhaps the only question, given the extensiveness of the dovish rhetoic/ comments is how much will the RBNZ cut? could it be 50bps rather than than the usual 25bps given how aggressively dovish they have came out on the record.
1. From current levels there is little interest in adding fresh shorts - shorts still standing from 0.72/3 are firm and should be held. A 25bps cut IMO will take NZDUSD to 0.68TP and a 50bps cut, with the shock pricing it even lower, likely to 0.65/4.
2. Risks to this downside view continue to be RBNZ driven. As we have seen in the past 2wks Kiwi has traded at the mercy of the RBNZ - 2wks ago when the OCR rate cut initially began to price us to 0.70, the RBNZ came on record talking about kiwi house prices limiting the ability to cut the OCR which caused NZD$ to rally back to 12m highs, where then a week later, the RBNZ announced their emergency "economic assesment" which completely flipped the script back on the dovish side - now this week the assesment has been released and is dovish with the rate hike being price now.
- But in the 3wks between now and the rate decision, im sure there is a level for more RBNZ comments to conflict this dovish sentiment.
RBNZ Economic Assessment Highlights:
-RBNZ: Further Policy Easing Likely
-RBNZ: Will Continue to Watch Emerging Flow of Data
-RBNZ: House Price Excessive
-RBNZ: Bank Lending Curbs Aim To Limit Financial Sector Instability
-RBNZ: Many Uncertainties Around Outlook
-RBNZ: High New Zealand Dollar Adding To Headiwinds For Dairy, Manufacturing
-RBNZ: High NZ Dollar Makes It Harder To Achieve Target
Yes i would say its likely to retest 0.700, especially thursday GMT as kiwi trades well with risk and i expect risk to outperform thursday GM.
Shorts on NU, with all information known now, are solid from 0.71, anything else is too risky imo.