RBNZ’s concern over Business confidence can recede
In the August rate statement the RBNZ’s Governor Adrian Orr attributed part of the ‘lower rates for longer’ outlook to declining business confidence. That was understandable when you realise that the level was one of the lowest for a decade and moving to around the 2008 financial crisis level. Sad times. You can read the rate statement here and see Orr’s comments on business confidence towards the end of the statement.
However, those concerns can now lift before the rate statement tomorrow, since business confidence has shown a strong rebound in September from -50.3 to -38.3. Furthermore, GDP was up 1% last week vs 0.8% expected, so there are reasons for Governor Orr to not rush to cut rates at the moment and the decision is expected to be ‘on hold’. The picture is not completely rosy for the NZD by any means and the trade balance showed a large deficit last night which the market is largely looking through — see here and Eamonn’s report earlier.
If the NZD/USD price does drop in the London session then the daily pivot and 1 hr 200 EMA region look a good place for longs. My view is that the rebound in business confidence is the data to focus on to give confidence for a NZD long . You will need to pull your position before the Fed rate statement out at 1900GMT as the volatility would queer the pitch on the entry and exit parameters below.