Alert on possible NZD action tonight

Here is a quick trading alert for those of you trading NZD, or the kiwi tonight.

 Wheeler on deck RBNZ stability report

RBNZ governor Graeme Wheeler is scheduled to give a press conference tonight (May 13 @ 17:00 ET, 21:00 GMT, 22:00 BST/London) following the release of the RBNZ’s bi-annual financial stability report. There is a chance Governor Wheeler could use the opportunity to talk down the currency as he last did in last week’s speech to NZ’s dairy association last week.  At the last financial stability report on Nov 13, Wheeler reminded markets interest rates were set to rise in 2014 owing to higher growth, but that the impact of the already rising kiwi and high debt levels among dairy farmers would be taken in consideration when assessing the pace of policy tightening.

Since Nov 13, NZDUSD rose 5%, dairy prices fell 5% and the official cash rate has been hiked twice by a total of 50 bps.  Thus, one of the conclusions from tonight’s report, could be that upcoming tightening will progress at a slower pace than has the rate of the last 4 months, which could weigh on the kiwi.

Core retail sales to follow next

Another item which could also drag down the kiwi is the Q1 retail sales volumes, due at 18:45 ET, 23:45 London, expected to show a rise of 0.9% from the previous 1.2%. Recall, the Q4 report, released in February, had shown a 1.2% rise vs expectations of +1.7%, which helped trigger a 4-week decline in NZD.

Since last week’s warning against further NZD weakness, warning on the negative implications of declining dairy prices, kiwi is down across the board.

Will tonight’s double-event action cause further damage? Despite today;s NZDUSD rebound, we could see renewed declines towards 0.8520s, while any bounce above 0.8700 will likely run into the 0.8820 barrier.