NZD/USD on the move to the upside in improvd risk sentiment, but RBNZ could clip its wings

• RBNZ expectations are for the central bank to be on hold, but the forward guidance is what is key. 
• Risk sentiment has improved following China’s National Health Commission confirmed that the new coronavirus cases had actually fallen.

NZD/USD is trading on the bid in early Asia, with a range of between 0.6378 and 0.6421 as markets get set for the Reserve Bank of New Zealand today and the Monetary Policy Statement, (MPS).

The greenback overnight was lifted with higher yields, but the commodity complex was also better off due to improved sentiment surrounding the coronavirus. On Tuesday, China’s National Health Commission confirmed that the new coronavirus cases had actually fallen to 2,478 from 3,062 a day earlier, bringing the total to 42,638 on the mainland, including some of whom have since recovered and been released from treatment.

The NZD and AUD were benefitting from the headlines which inturn lifted global financial and commodity markets (copper +1.1%, CRB index +0.44% time of writing) as it is signifying that the Chinese are making progress in combatting and containing the virus. However, whether this will be enough promising news for the RBNZ today is an entirely different matter. 

 RBNZ expectations

Expectations are for no change in the OCR, but the skittish behaviour of the NZD reflects nervousness that the RBNZ might cut on the back of the hit to global growth stemming from the virus, which is starting to overshadow otherwise promising signs of improvement in domestic economic momentum," analysts at ANZ Bank argued, who recently downgraded their outlook for Gross Domestic Growth in 2020 for New Zealand, lowering projections to 0.8% for the first half of 2020 from 1.3%.

For a full preview of the RBNZ, see here: RBNZ Preview: Coronavirus should limit upside potential for NZD/USD

NZD/USD levels

• Support 0.6360
• Resistance 0.6450