NZD: NZD/USD - Trades Heavy Around 0.5600 As Risk-On Fizzles In Asia
The NZD/USD had a range today of 0.5598 - 0.5622 in the Asia-Pac session, going into the London open trading around 0.5600, -0.20%. The NZD/USD has drifted lower in a quiet Asian session, where risk has not followed through with the overnight strength seen. The NZD is consolidating around the 0.6600 area and like the AUD considering the move in risk overnight I am a little surprised it didn't try to push a little higher. The RBNZ this week will be important as they start to approach neutral, the market is already short NZD so I am mindful of any dovish disappointment. On the day though, while 0.5635-50 caps price the bears remain in charge, a move back below 0.5580 and the market will start lasering onto the pivotal 0.5500 area.
- MNI AU - The RBNZ is likely to cut rates 25bp on 26 November to 2.25%, edging below its estimate of "neutral". 2/24 analysts on Bloomberg are forecasting 50bp. The data released since the October decision have been consistent with a gradual but soft recovery and importantly close to the RBNZ's August expectations and thus there is unlikely to be another outsized 50bp easing.
- The focus will be on revisions to the RBNZ’s OCR path. Q1 will be the interesting quarter. There is only one meeting scheduled in Q1 on 18 February and a 2.1% would signal further easing. The market currently has 27bps of easing priced for November's meeting and a cumulative 35bps by February 2026.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5600(NZD600m), 0.5640(NZD360m), 0.5720(NZD646m). Upcoming Close Strikes : 0.5670(NZD788m Nov 26) - BBG
- The NZD/USD Average True Range for the last 10 Trading days: 37 Points
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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FED: MNI Fed Preview - October 2025: QT, Or Not QT
MNI's preview of the October FOMC has been published - Download Full Report Here
- The Federal Reserve is overwhelmingly expected to cut the funds rate by 25bp for a 2nd consecutive meeting on October 29, bringing the target range to 3.75-4.00%.
- This will again be framed as a risk management cut, with the limited data available since the September meeting not disconfirming that the shift in the balance of risks had tilted toward labor market downside.
- Dissent to this decision should once again be limited to Gov Miran in favor of a 50bp cut.
- With limited new developments and official data to opine on, Chair Powell’s press conference will be eyed for affirmation that a December cut remains on track, as signalled by the most recent Dot Plot.
- He’s unlikely to give much away, but it would be surprise given the lack of data and relevant developments if he suggested that a further 2025 cut was in any greater doubt than it was 6 weeks earlier.
- Instead, we think focus in terms of action at this meeting will be on the balance sheet, with the Fed likely to announce an end to quantitative tightening amid diminishing reserve levels and nascent evidence of funding market pressures.
- We will also be watching for any news on the Fed’s communications framework, with an updated “Dot Plot” potentially unveiled at some point by year-end.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Oct 27
RATINGS: Moody's Lowers France's Outlook To Negative, Maintains Aa3 Rating
Moody's has lowered its outlook on France to negative from stable.
- Moody's was expected to at least lower the outlook, so this is not a surprise - there had been some risks perceived of a downgrade to A1 (from Aa3) in the domestic and foreign currency long-term issuer and domestic-currency senior unsecured ratings.
- Per the Moody's release: "The decision to change the outlook to negative reflects the increased risk that the fragmentation of the country's political landscape will continue to impair the functioning of France's legislative institutions. This political instability risks hampering the government's ability to address key policy challenges such as an elevated fiscal deficit, rising debt burden, and durable increase in borrowing costs, thus leading to a more rapid weakening in France's key fiscal metrics than we currently expect."
- Both S&P and Fitch have already downgraded France’s sovereign rating to the single-A bucket this year.
USDCAD TECHS: Corrective Pullback
- RES 4: 1.4200 Round number resistance
- RES 3: 1.4167 50.0% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.4111 High Apr 10
- RES 1: 1.4080 High Oct 16 and the bull trigger
- PRICE: 1.4016 @ 16:33 BST Oct 24
- SUP 1: 1.3979/3907 20- and 50-day EMA values
- SUP 2: 1.3829 Bull channel base drawn from the Jul 23 low
- SUP 3: 1.3769 Low Sep 19
- SUP 4: 1.3727 Low Aug 29 and a bear trigger
USDCAD has pulled back from its recent highs. The trend condition is bullish and a move lower is considered corrective. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4111, the Apr 10 high, and further out, scope is seen for an extension towards 1.4167, a Fibonacci retracement. First key support lies at 1.3907, the 50-day EMA. Support at the 20-day EMA lies at 1.3979.
