Cut to 2.75% expected, but what will the statement/presser and global markets do?
The RBNZ is largely expected to cut rates when they announce at 5 PM. Gov. Wheeler will then speak and the focus will be on whether he talks about the currency being too high or just right, or about future rate cuts.
Looking at the hourly chart, the last two weeks has seen the price try to create a floor at the 0.6407 level. That was broken on August 31. The high price on September moved up to 0.6413 and fell back down again to a low price for the month at 0.62429. The last 2 trading days have seen the price move back toward the 0.6400 area. Today's high extended up to 0.6424 before settling back lower.
So I would expect traders to use the 0.6407 to 0.6424 area as a fat "line in the sand". Move above it on a statement/press conference that is not so dovish, and the buyers may start to look towards the 0.6475 and then 0.6500 area.
If the cut is accompanied by more dovish comments (i.e. concerns about China/global growth, expectations for further cuts,etc), then a move back toward the 200 hour MA (green line in the chart above) at the 0.6347, the 100 hour MA (blue line in the chart above) and 0.6325, and the broken trend line at 0.6315 will be the bearish targets to get and stay below. That seems like the logical path given the global uncertainty but there are considerations (see Adams post on DBs view by clicking here)
What about stocks?
The US stock market is closing at the lows and generally speaking (not guaranteed), a weaker stock market has led to weaker commodity currencies. Focus may shift from the statement to the Asian Pacific stock markets - especially given the oversized 7.7% gain in the Nikkei index yesterday. How will it perform today given the reversal in the US markets (of course eyes will be on China as well).
