NZD/USD rallies over 1% to recapture 0.6450 amid notable USD supply
|- NZD/USD extends the previous gains as USD remains heavy.
- RBNZ is on track to hike OCR by 50 bps at its May policy meeting.
- Mixed Chinese headlines limit NZD bulls as traders turn cautious.
NZD/USD is sitting at three-week highs of 0.6467, having entered a consolidative mode heading into the European open.
The rally in the kiwi pair could be linked to a combination of factors, as we step into the Reserve Bank of New Zealand (RBNZ) policy meeting week.
NZD bulls remain hopeful amid expectations of a 50 bps rate hike due to be delivered by the RBNZ this Wednesday. The latest report released by the New Zealand Institute of Economic Research (NZIER) revealed, “the majority view amongst Shadow Board members was that the Official Cash Rate (OCR) should be increased by 50 basis points at the May meeting.”
The major also derived its strength from the broad-based US dollar decline, as investors continued cutting their bullish bets on the buck, extending the overdue correction from two-decade highs.
Further, the regime changes in Australia, with the Labor Party-led government now in power, also fuelled optimism around the Antipodeans. Meanwhile, New Zealand PM Jacinda Ardern is reported to lead a trade delegation to the US this week.
Although mixed coronavirus news from China’s capital Beijing kept investors unnerved. Early Asia, it was reported that the city saw record covid cases. But later on, the South China Morning Post (SCMP) reported, citing sources, that Beijing mulled relaxing the quarantine policy amid investor angst.
All eyes now remain on Wednesday’s RBNZ policy outcome for the next big move in the kiwi. Until then the broader market tone and the dollar price action will remain the driving forces.
NZD/USD: Technical levels to consider
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