MNI EXCLUSIVE: Former RBNZ Official Discusses Future Path Of OCR

Risk-sensitive currencies outperformed on Monday driven by stronger risk appetite and weaker US dollar due to disappointing US retail sales (USD index -0.3%). AUDUSD rose 1% to 0.6384, close to the intraday high of 0.6391. It broke above initial resistance at 0.6364 and 0.6379 opening up the bull trigger at 0.6409. 

• AUDUSD’s short-term bullish theme persists and a clear break of the bull trigger would strengthen the bull cycle. Initial support is at 0.6259, 11 March low, and a break of key support at 0.6088 is required for the resumption of a bear threat.
• Kiwi outperformed yesterday rising 1.3% against the greenback. This left AUDNZD down 0.3% to 1.0970. It is currently slightly higher at 1.0973.
• The yen underperformed and so AUDJPY is 1.3% higher at 95.25.
• Aussie has begun to recover against the euro and rose 0.6% on Monday to 0.5847 after a high of 0.5853, the highest since March 7. AUDGBP is 0.5% higher at 0.4915, close to the intraday peak of 0.4918.
• Equities rallied with the S&P up 0.6% and Euro stoxx +0.8%. Oil prices were higher with Brent +0.6% to $70.97/bbl. Copper is 1.7% higher and iron ore continues around $102-103/t.
• Today Assistant Governor (Economic) Hunter speaks at the AFR banking summit at 1015 AEDT.   

NZD/USD was the top performer in the G10 space for Monday's session, rising 1.25%. It was followed by NOK and AUD, with commodity FX outperforming in the G10 space, while yen was a clear laggard (down 0.38%). Current levels for NZD leave us at 0.5815/20, which is fresh highs since mid Dec last year. 

• For NZD/USD technicals, the 200-day EMA is at 0.5861, beyond that is is likely 0.5900 round figure resistance. We moved convincingly above 0.5760/65 resistance yesterday, which could now act as a support point on any pull back in the pair.
• Firmer risk sentiment on Monday was the dominant theme, with global equities continuing to recover ground. This allowed the higher beta currencies to outperform in the G10 FX space. Added to this, weaker details within the US retail sales report bolstered the softer dollar theme. US yields were softer at the back end of the curve, but resilient at the front end.
• The strong risk backdrop drove NZD/JPY through its 50-day EMA, the pair up +1.62% yesterday. This is the first time we have moved above this resistance point since Jan of this year, we were last 86.80/85. Recent lows were close to 83.00 in early March.
• Even with AUD also rallying, NZD has outperformed of late, with the AUD/NZD cross back sub 1.1000.
• The local data calendar just has non-resident bond holdings for Feb on tap today. Tomorrow we get Q1 Westpac consumer confidence along with the Q4 current account.