RBNZ decision tomorrow

The RBNZ’s interest rate decision is set to occur during tomorrow’s Asian trading session with the bank expected to hike rates.

MORNING OVERVIEW

We’re looking forward to the RBNZ’s decision during tomorrow’s Asian trading session, in which the bank appears poised to hike rates by 25 basis points. Moreover, for today we would be looking at the release of the US Durable goods orders rate, which could provide support for the dollar leading up to the Fed’s interest rate decision.

MARKET SNAPSHOT

KEY MARKET THEMES

01 — RBNZ’s interest rate decision tomorrow

The RBNZ’s interest rate decision is set to occur during tomorrow’s Asian session. The market may be expecting a rate hike by 25 basis points, with NZD OIS currently implying a 96.87% possibly for such a scenario to materialize. In turn, the Kiwi may be gaining support leading up to the interest rate decision tomorrow. Moreover, should the bank in its accompanying statement imply further rate hikes to come, it may provide support for the NZD. On the other hand, should the bank imply that they may withhold from raising rates in the future it could have the opposite effect.

Market implication (NZD): Bullish

02 — US Durable Goods orders due out today

The US Durable Goods orders for the month of September are set to be released later on today. The rate for September is set to improve, which could provide support for the USD as it may infer an increase in spending for manufacturing and businesses. Therefore, the rate expected by economists of 2.0% versus the prior rate of 0% on a month-on-month basis could aid the USD.

Market implication (USD): Bullish

03 — ECB Lagarde to speak today

ECB President Lagarde is set to speak later on today. The comments by Lagarde could provide insight for market participants into the ECB’s next steps leading up to their decision. Therefore, the commentary could influence the EUR’s direction.

Market implication (EUR): N/A

WHAT MATTERS TODAY

US Durable Goods orders rate for September (MoM)

Time GMT+2): 14:30

Expected: 2.0%
Previous: 0.0%

Potential market reaction:
Could support USD

WHAT MATTERS TOMORROW

RBNZ decision

Time GMT+2): 03:00

Expected: 3.00%
Previous: 2.75%

Potential market reaction:
Could support NZD

ASSET FOCUS

[GOLD , Commodities]

Gold appears to be moving in a downwards fashion, with the precious metal’s price having cleared our old support now turned to resistance at the 4080 (R1) level. We opt for a bearish outlook for the commodity’s price and supporting our case is the RSI indicator below our chart which tends to imply a bearish market sentiment. For our bearish outlook to be maintained, we would require a break below our 3945 (S1) support level, with the next possible target for the bears being our 3820 (S2) support line. On the other hand, for a sideways bias we would require gold’s price to remain confined between our 3945 (S1) support level and our 4080 (R1) resistance line. Lastly, for a bullish outlook, we would require a clear break above our 4080 (R1) resistance level, with the next possible target for the bulls being our 4200 (R2) resistance line.

KEY LEVELS

• Resistance (R1): 4080
• Resistance (R2): 4200
• Support (S1): 3945
• Support (S2): 3820

Technical View: Bearish

CROSS-ASSET VIEW

TRADING SPHERE VIEW

Bearish for GOLD

Our base case:
We wouldn’t be surprised to see gold’s price moving lower, considering the anticipated improvement in the Durable goods orders rate which could support the dollar. Moreover, with the Fed’s interest rate decision tomorrow,any hawkish implications could aid the dollar whilst weighing on gold’s price.

What would change our view:
Dovish Fed commentary

RISKS TO THE VIEW

Unexpected events

An unexpected event could upend our view

TODAY’s WATCHLIST

01 US Durable Goods orders rate

02 ECB Lagarde’s speech