Global macro overview for 22/06/2017:
The Reserve Bank of New Zealand voted to keep its official cash rate at 1.75% as expected. In the official statement, RBNZ said is "remaining accommodative for some time" due to the "uncertainties remaining". Nevertheless, RBZN may still need to "adjust policy accordingly", so all the statements are again in line with expectations. One important change in the statement was related to the GDP projections and it was: "outlook for domestic economic growth remains positive", which is a change in tone from the previous statements. As the government data showed last week, New Zealand's economy expanded at a slightly weaker than expected pace in the first quarter of 2017. That resulted in a year-over-year expansion of 2.5%, which was fueled by agriculture, retail trade, manufacturing and household consumption. Moreover, the latest Westpac consumer survey revealed, that consumption might continue higher in the second quarter of 2017 as the consumer confidence index in on highest level in two years.
In conclusion, RBNZ wants to keep the interest rates low in support of faster inflation and economic growth. The inflationary pressures were hotter in the first quarter after the consumer price index (CPI) climbed to 2.2% in January-March, much higher than the Reserve Bank's forecast of 1.5%. If the inflation accelerates even higher, RBNZ will have no choice, but to change the rhetoric to more hawkish and eventually hike the interest rate. Eventually, the New Zealand dollar might appreciate even more in the longer term.
Let's now take a look at the NZD/USD technical picture on the H4 time frame. The bulls are trying to break out above the golden trend line around the level of 0.7300, but so far no avail. The Market conditions are overbought and the next technical support is seen at the level of 0.7183 - 0.7169 and the next technical resistance is seen at the level of 0.7319.
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