New Zealand Dollar steadies near its lows as RBNZ hike bets keep building

Five straight weekly declines have left NZD/USD at its lowest since late June. Monday's low near 0.5650 matched Thursday's and Friday's, and the pair closed just above it with a small gain. Markets now price about an 80% chance that the Reserve Bank of New Zealand (RBNZ) raises its Official Cash Rate (OCR) to 3% from 2.75% on October 28, against roughly a one-in-three chance right after the September 2 hike.

The RBNZ decides ten days before New Zealand votes

RBNZ Governor Breman said on September 22 that higher Crude Oil prices could push near-term inflation above what the RBNZ assumed in September, and hike bets have built since. Second-quarter GDP beat forecasts on September 17 and revisions lifted the first quarter, which had already pushed the odds above even. The RBNZ's own rate track, published on September 2, pointed to a pause in October and a hike in December. New Zealand's third-quarter Consumer Price Index (CPI) lands on October 21, one week before the decision, and the general election follows on November 7. The RBNZ gets a week with the inflation number and voters get ten days with the RBNZ's decision.

A hike alone won't lift the Kiwi if the Fed moves on the same day. The Fed announces about 17 hours after the RBNZ, and futures lean toward a quarter-point increase from 3.75%-4.00%, which would leave the gap between the two central banks exactly where it is. Swaps put the OCR near 4% at the end of the cycle, still below where the Fed's range sits now, which is why the Kiwi has kept falling while the RBNZ pricing climbed.

US numbers will do more work than New Zealand's before Friday

New Zealand's August building permits come out on Wednesday at 21:45 GMT after a -4.3% fall in July, and ANZ-Roy Morgan consumer confidence follows on Thursday at 21:00 GMT, previously 98. Neither is likely to shift an October hike that markets already rate at four-in-five.

The Kiwi's chance at relief is in the US data. Core Personal Consumption Expenditures (PCE) inflation is forecast at 3.4% YoY on Wednesday, the Institute for Supply Management (ISM) manufacturing survey at 54.9 on Thursday, and September payrolls at 84K on Friday against 162K in August. It's possible a weak jobs count talks the Fed out of October, though the inflation forecast two days earlier points the other way.

Levels to watch into Friday's payrolls

Resistance: 0.5700 has capped every session since the September 23 break, Monday included. Above that, 0.5750 is where the September 22 rebound stopped.

Support: 0.5650 held on Thursday, Friday and Monday. Beneath 0.5650, the late-June low just above 0.5600 is the only stop before 0.5550.

Bias: Short below 0.5700, targeting 0.5600 and then 0.5550. The daily Stochastic Relative Strength Index (Stoch RSI) reading has stayed in single digits since mid-September, so the lean allows for a bounce toward 0.5700 without changing. A daily close above 0.5750 cancels it.

NZD/USD daily chart