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NZD/USD Steadies on RBNZ Rate Hike

NZD/USD Steadies on RBNZ Rate Hike

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NZD/USD inched higher after the Reserve bank of New Zealand delivered a 50 basis-point increase in the Official cash Rate (OCR).

At the time of writing, the Kiwi is higher against the dollar by +0.20 percent at 0.6357, around 1.70 percent below Monday’s high.

Just moments ago, the RBNZ raised rates to 3.00 percent as expected. The focus now shifts to the approaching press conference for clues on future policy adjustments.

The central bank has outlined plans to bring the official cash rate up to 4.00 percent over the next year. However, a recent report from ING bank cast doubts on his forecast:

“In our view, the risk of a revision lower in the rate projections at the August meeting is elevated. The RBNZ is currently forecasting a terminal rate of around 4.0% by mid-2023 (chart below), which is starting to look less realistic. We may see 25bp or 50bp being trimmed off the terminal rate projections and/or rate cuts being added sometime in 2023, in what would be a de-facto dovish shift. Alternatively, the Bank may keep rate projections unchanged (at the risk of losing some credibility) to avoid an unwanted impact on inflation expectations. A revision of the rate path later in the year would at that point be quite likely.”

New Zealand Dollar to US Dollar Outlook

How the kiwi performs against the dollar depends on whether the RNBZ adopts a more-dovish tone at the impending presser. The bank is likely to discuss the worsening global outlook, specifically the worrying slowdown in China.

If the presser reveals the central is wavering from it’s hawkish path, we should expect NZD/USD to turn lower. By contrast, the Kiwi should strengthen if the bank doubles down on rate projections.

With that in mind, the daily chart highlights the key levels to watch.

Above the market, the 100-Day Moving Average (DMA) at 0.6416 (blue line) is the first obvious resistance level. Whereas below, the 50-DMA at 0.6268 (green line) provides support.

As long as the New Zealand dollar to US dollar exchange rate remains within these barriers, sideways action will prevail. However, clearance of either indicator should lead to a price extension. For that reason, the immediate outlook is neutral, flipping to bullish or bearish, depending on which threshold is breached.

NZD/USD Price Chart


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Elliot Laybourne
Elliott is a former investment banker with a 20 year career in the city of London. During this time he held senior roles at ABN Amro, Societe Generale, Marex Financial and Natixis bank, specialising in commodity derivatives and options market-making. During this time, Elliott’s client list included Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and the Pennsylvania State Public School Employees Retirement System, amongst others. Today, he splits his time between Thailand and Dubai, from where he provides trading consultancy and business development services for family office and brokerage clientele.