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RBNZ/FOMC Announcements - NZD/USD Reaction

FOMC - The FOMC is maintaining its course saying that the economy is improving despite low inflation. The crux of today's FOMC statement is that the mid-2015 rate hike projection is still on. This was a relatively hawkish statement because many had doubts that the FOMC would be able to remain hawkish after other central banks became more dovish, started cutting rates and increased stimulus measures. The hawkish tone is giving the USD a boost.

RBNZ - The RBNZ gave neutral statement, but some might interpret it as dovish because governor Graeme Wheeler did not defend against cutting rates. With inflation going down, the door is thus open for a rate cut this year. He also said that he expects to see further depreciation of the exchange rate. The neutral-dovish tone and the jawboning about the NZD is pressuring the currency across the board.

The NZD/USD plunged after the central bank statements.

NZD/USD 4H Chart 1/28


(click to enlarge)

NZD/USD - The 4H chart shows that after a hesitation ahead of the FOMC ad RBNZ announcements, the NZD/USD fell sharply, continuing its prevailing downtrend. In this bearish continuation scenario, the 0.74-0.7450 area should become resistance.

To the downside the 0.73 handle is sight for the very short-term, with risk of continuing to the 0.71, 2011-low.