New Zealand Dollar jumps sharply after RBNZ turned out to be less dovish than expected. OCR was kept at 1.75% as widely expected. And, the central bank restored the language that “the direction of our next OCR move could be up or down” in the statement. However, there was no more dovish tweak.

In short, RBNZ expected interest rate to be unchanged at current level “through 2019 and 2020”. It maintained the view that “As capacity pressures build, consumer price inflation is expected to rise to around the mid-point of our target range at 2 percent.”

And, there were upside and downside risks to the outlook. RBNZ noted “there are upside and downside risks to this outlook. A more pronounced global downturn could weigh on domestic demand, but inflation could rise faster if firms pass on cost increases to prices to a greater extent.”

The overall statement was pretty balanced and did nothing to endorse market speculation of a rate cut by year end.

Full RBNZ February MPS here.

With today’s strong rebound in NZD/USD, focus is back on 0.6941 resistance. Firm break there will complete the corrective pattern from 0.6969 and resume the whole rise from 0.6424. That will be a rather bullish development, but only until it happens.

RBNZ rate decision will be a major focus in the coming Asian session. There is no chance of a shift in OCR, which is currently at 1.75%. While the economy appeared to have picked up momentum in Q3, Q4 data proved that was only a false dawn. RBNZ’s today in the upcoming statement should at least switch to the absolute neutral stance. That is, the language that next move could be up or down would be reintroduced. And there is prospect for the central to even tilt more to the dovish side.

Here are some suggested readings:

• RBNZ Preview – Turning More Dovish while Affirming Next Move Can be Up or Down
• Australia & New Zealand Weekly: RBA Shifts to a More Balanced View
• RBNZ May Appear Dovish, But Not Enough to Satisfy the Bears
• Reserve Bank of New Zealand (RBNZ) – What to Expect
• Aussie and Kiwi Outlook: Storm Clouds Gathering?
• Dollar Hit by Profit-Taking; RBNZ and US CPI in Focus

NZD/USD dived sharply last week after weaker than expected job data. But the decline slowed this week, with 4 hour MACD crossed above signal line. Intraday bias is turned neutral for now. As long as 0.6773 minor resistance holds, we’d expect further decline ahead. Break of 0.6706 will pave the way to 0.6551 low.

Nevertheless, break of 0.6773 will indicate shorty term bottoming and bring stronger recovery. But even in that case, we don’t expect a break of 0.6941 resistance in near term.