NZD/USD Prediction Ahead of the RBNZ Decision
New Zealand dollar (NZD/USD) declined to the lowest point since August 10 as investors waited for the upcoming interest rate decision by the RBNZ. It dropped to a low of 0.6317, which was lower than this month’s high of 0.6467.
RBNZ decision ahead
New Zealand’s economy has done relatively well in the past few months. This recovery was helped by the country’s reopening and the ongoing upswing in the tourism industry. As a result, international trade has recovered while the number of international arrivals has increased.
It is against this backdrop that the Reserve Bank of New Zealand will conclude its two-day meeting on Wednesday morning. Economists polled by Reuters believe that the bank will decide to hike interest rates by 0.50%. If this happens, the headline interest rate will move to 3%. It will be the sixth straight meeting that the bank has hiked interest rates.
The bank will increase its interest rates because of the soaring inflation. Data published recently showed that the headline consumer price index (CPI) rose to a multi-decade high of over 7%. Analysts believe that inflation will peak at about 9% this year and then start to retreat in 2023.
New Zealand has had an elevated inflation rate because the country is an importer of oil and gas. And recently, the prices of the two commodities has remained at an elevated level. The unemployment rate has also dropped to the lowest level in years.
Turning to the three-hour chart, we see that the NZD/USD pair has been in an upward trend in the past few weeks. In this period, the New Zealand dollar has formed an ascending channel that is shown in blue.
Recently, however, the pair has declined below the upper side of the channel. It has also declined below the 25-day and 50-day moving averages while the MACD has crossed the neutral level. Therefore, the pair will likely continue falling as sellers target the next key support at 0.6250.