NZD: Asia Wrap - NZD/USD Consolidating Gains, Eyes 0.6100

The NZD/USD had a range of 0.5924 - 0.5980 in the Asia-Pac session, going into the London open trading around 0.5960. The NZD has bounced pretty hard with the RBNZ being surprisingly hawkish suggesting that they are pretty close to neutral now.

• The RBNZ decision, has aided NZD, with the 25bps cut and lowered OCR projection offset by the non-unanimous decision. This hints further cuts may be harder to come by, while Governor Hawkesby wouldn't be drawn on the policy bias at the next meeting, with central bank well placed to respond to developments. RBNZ officials also note the new OCR of 3.25% is in the neutral zone.
• "RBNZ GOV HAWKESBY: HAVE LOWERED RATES A CONSIDERABLE WAY, STILL WORKING WAY THROUGH - [RTRS]"
•  "RBNZ'S CONWAY: OCR AT 3.25% IS `INTO NEUTRAL ZONE'" - BBG.
• The NZD has bounced across the board on the back of this and expect this price action to continue as shorts that had been added to hoping for a more dovish outcome are pared back.
• The NZD continues to trade in a 0.5850/0.6050 range, another failure above 0.6000 and with corporate month-end in play be on the lookout for more demand of USD’s over the next day or 2.
• The support back towards 0.5800 has held very well, and while this continues to hold expect buyers to be around on dips. The first target is the highs just above 0.6000, a break here could provide the spark for the next leg higher.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5725(NZD1.09b). Upcoming Close Strikes :  0.5975(NZD400m May 29)

• AUD/NZD range for the session has been 1.0779 - 1.0851, currently trading 1.0790. A sustained break above 1.0930 is needed to turn the focus higher, until then expect supply on bounces.  It traded up to a high around 1.0851 just before the RBNZ, but has subsequently dropped lower as the RBNZ suggests they are close to neutral. A top looks in place now just above 1.0900, the market will have been looking for a more dovish tone today and AUD/NZD should now see supply on bounces. The first target is around 1.0650.

  Fig 1: AUD/NZD Spot Daily Chart

  

  Source: MNI - Market News/Bloomberg

   

The AUD/USD has had a tight range of 0.6426 - 0.6454 in the Asia- Pac session, it is currently trading around 0.6430 drifting down back towards the days lows.

• April headline inflation was unchanged at 2.4% y/y, slightly higher than expected, while the trimmed mean picked up 0.1pp to 2.8% y/y. The focus is on the latter as headline is likely to be impacted by government electricity rebates until year end.
• We head into the corporate month-end and this could see more demand for USD’s over the next day or 2.
• Expect buyers to continue to be around on dips while the support in the AUD holds, a close back below 0.6300/50 would start to challenge the newly formed uptrend. A break above 0.6550 and the move higher could begin to accelerate.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6325(AUD430m). Upcoming Close Strikes : 0.6400(AUD 556m June 2), 0.6500(AUD 532m May 30)

• AUD/JPY - Today's range 92.75 - 93.23, it is trading currently around 93.00. The pair has again found supply above the 93.00 area in today's session, a break back above 93.50 could see the focus return once more to the 95/96 area.

  Fig 1: AUD/USD spot Daily Chart

  

  Source: MNI - Market News/Bloomberg