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NZD/USD Bulls Are Retaking Control

November 25, 2021

Talking Points:

  • Following the RBNZ’s cleanout, NZD/USD bulls are going in to test the bears.
  • The attention is on the 50 % mean reversion around 0.6920.

The bird fell out of the sky, according to technical observations made by the Reserve Bank of New Zealand yesterday, which was seen as a less hawkish outcome.

They said ”A dovish hike, could consist of concern over covid contagion, geopolitical risks, the guidance of incremental 25bps hikes, contingent on various factors.” 

The bulls were particularly upset by the 25 basis point rate hike road map.

RBNZ’s Forecasts for the Future

  • Official cash rate at 0.94% for March 2022 (previously 0.86%).
  • This changes to 2.14% for December 2022 (vs the prior 1.62%).
  • Then 2.3% for March 2023 (prior 1.77%).
  • And then 2.61% for December 2024. 

On the technical side, 0.6950 was seen as a line in the sand in this regard, with a break opening the door to a retest of the 0.6880s and then 0.68 the figure.

0.6880s have already been thoroughly tested:

At this point, we may have to wait until next week to see the market’s complete reaction to the Federal Reserve’s super hawkishness after today’s response to the minutes. At this point, a correction could take place before the decline continues:

The attention is on the 50 % mean reversion around 0.6920.

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