The jump higher meets a pause as buyers run into notable resistance levels
In the bigger picture, the mid-January highs around 0.6845-50 is currently helping to limit gains in the pair after the RBNZ gave the kiwi a shot in the arm as the central bank was less dovish than anticipated earlier today.
The kiwi bounced on short covering but notably the bounce comes as price failed to break below the 100-day MA (red line) @ 0.6728 and has even moved back above the 200-day MA (blue line) @ 0.6754. That puts buyers back in the driver's seat but the near-term chart indicates that the comfort zone should not be taken for granted.
The move higher in the kiwi saw it break back above both key hourly moving averages as well though the highs fall short of testing the 61.8 retracement level of the recent swing move lower @ 0.6857.
That said, buyers are in near-term control as well but the key in the sessions ahead will be to stay above the 200-hour MA (blue line), currently sitting @ 0.6812.
So, what's next for the kiwi?
Basically, the move earlier has much more to do with short covering than a major shift in kiwi sentiment. The RBNZ is still nowhere near being able to hike rates but their stance earlier just means they are not yet shifting towards being more neutral.
A rate cut isn't on the horizon just yet and markets are basically just revising their anticipation of that at the moment. Given that's the case, it's not going to spur continuous gains in the kiwi as what is taking place is just some repricing of market odds.
The key risk event in the near-term is still the US-China trade talks so expect kiwi (as well as risk assets) sentiment to focus much on that.
I anticipate the kiwi's gains earlier will be tempered with slightly so be wary of a potential move back to test the 200-hour MA. But later in the week or at the start of next week, trade developments are likely to dictate the next move and I still view it is more than likely to take a more positive turn.
But all else being equal, market participants will continue to grow more bearish about the RBNZ's rate hike odds down the road so expect that to cap any material kiwi gains in the bigger picture.
