As we reported yesterday, a Bloomberg survey of 14 economists unanimously predicted this mornings 25 bps rate rise to 3.00%. The NZD/USD fell 70 pips immediately after the announcement and has been unchanged for the last hour at .7210. AUD/NZD is back above hourly resistance at 1.2350.

(Edit) Further hikes are expected to be more gradual and hence the sell-off in the NZD.

Did you know that the Prime Minister of New Zealand is a former FX spot trader? In fact a friend of mine once offered him a job but didn’t get taken up because he didn’t offer enough money. The Kiwi politicians are always trying to talk the AUD/NZD up and Mr Key is now using his FX expertise to explain why investors should be buying the AUD rather than the NZD.

They have been very busy in the last few days, mainly selling dollars, but now they are targeting the AUD/NZD cross for purely technical reasons. Their argument is that, after a period of consolidation, this pair is again set to break higher. They are long at 1.3116 with 1.2920 s/l and minimum target 1.3640 and possibly 1.4240. No thanks Tom, not for me.

The market is unanimous in it’s expectation that the RBNZ will make no change to rates or policy tomorrow, but traders look to be still sitting short NZD both against the USD and the AUD. The NZD/USD has jumped up 30 pips in the last hour or so as the NZ trading day comes to a close. Expect more short covering on a break above .7080 in the NZD/USD.

Despite the unanimous expectation that the RBNZ will leave New Zealand rates unchanged on Thursday morning, the NZD market remains a bit nervous. The market bought AUD/NZD aggressively on the break above 1.30 but has been quite quick to off-load again, sending the pair to 1.2950 earlier today before recovering back to the 1.3000 psychological level at time of writing.

Interestingly enough, the big buyer of the pair in recent weeks has been a UK investment bank, probably on behalf of hedge funds. The very same bank put out an aggressive sell recommendation in the last 36 hours, calling for a move back to 1.22/1.23. Perhaps they know that the market is very long, or perhaps they know the same as the rest of us (very little).

After the massive moves in sterling last week, the market is looking for another ‘victim’ and it now has it’s greedy eyes on the poor little Kiwi. The break above 1.30 in the AUD/NZD is a very important event, technically speaking, and many traders are looking for a sharp swift move towards 1.37ish. That’s what’s leading to the NZD selling and the NZD/USD has fallen 60 pips this session back towards the overnight low at .6890. Markets doing what markets do, probing for a weak side.

As I mentioned yesterday, this is a pair which it makes a lot of ‘fundamental sense’ to hold and that is what a lot of professional players are doing- buying. The 1.30 option barrier was knocked out yesterday evening and we have opened today above that psychologically important level.

This is a pair which a lot of professional traders like to buy and hold as the theory goes that it’s a “no-brainer” trade to be long. Perhaps it is, but a quick look at the long term charts suggests a pair which is having massive difficulty in breaking above 1.30. This is now the fourth occasion in two years where prices have stalled below 1.30 and on each of the other three occasions, a significant fall ensued. Today’s strong trade data out of New Zealand has seen the pair fall from above 1.29 to below 1.28, another sign perhaps that the market is overly long.

Sales hit an 18 year low in January and the median price was 2.8% lower than in December (but still 7.7% higher YoY). The NZD/USD is about 20 pips lower on the session at .6970 and AUD/NZD continues on its recent upward run, now trading at 1.2760.

Interesting NY session with really only EUR higher from levels seen here in Asia yesterday. Short term top in place at 1.4365-70, with immediate support here at 1.4320 for those looking to trade the range. More buy orders are staggered back towards 1.4260, but I cant see them tested on the day. With  the Sydney temperature looking at topping 30 degreees celcius and traders already at Xmas breakfasts around town, I cant see too much happening. Look to trade 1.4300 – 50.

AUD saw a move towards the next level of resistance, 8820, but was met with good supply. Now back under 88c, I see more of the same with buyers at 8750 and sellers will stay at 8820. Watch AUDNZD, it has been holding 1.2440-50 but has been unable to move higher and looks under pressure here this morning with traders reporting some downside flows. A move down thru 1.2440 will see the AUD trade back to 8740. Personally, AUD feels a touch better bid today but not by much, Im still a happy seller on rallies Intraday.

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