NZD/USD whipsaws above 0.6950 on RBNZ rate hike
|- NZD/USD takes the bids following the RBNZ’s hawkish interest rate decision.
- New Zealand covid conditions worsen with a slow rise in virus infections, local lockdowns likely are extended.
- Risk appetite sours amid indecision over US debt limit, Sino-American headlines.
- US ADP Employment Change will join the qualitative factors to determine near-term moves ahead of Friday’s US NFP.
NZD/USD refreshes intraday top to 0.6980 following a 20-pip upside in a reaction to the Reserve Bank of New Zealand’s (RBNZ) rate hike decision during early Wednesday. The kiwi pair previously dropped to 0.6945 while snapping the four-day uptrend.
The RBNZ matches wide market expectations with 25 basis points (bps) of an increase to the benchmark interest rate, to 0.50% at the latest.
Read: RBNZ: Removal of monetary policy stimulus is expected over time
Before the RBNZ verdict, the NZD/USD prices dropped after a jump in the daily COVID-19 numbers from New Zealand to 39 versus 34 reported the previous day. It’s worth noting that the latest Quarterly Survey of Business Opinion (QSBO) from the New Zealand Institute of Economic Research (NZIER) and PM Jacinda Ardern’s resistance in easing the coronavirus-led activity restrictions challenged the kiwi buyers too.
Additionally, mildly risk-off mood, amid indecision over the US stimulus and raising the debt ceiling issues, coupled with China-linked headlines, also question the NZD/USD buyers.
US President Joe Biden stays optimistic over having the US debt ceiling extended before the October 18 deadline despite the GOP rejection. The reason could be the latest shift in the Republican policymakers’ tone and the global rating giant Moody’s keeping of the US credit rating. On the same line was the US Trade Representative’s (USTR) investigation over the exclusion of China imports also keeps the oil buyers hopeful. Furthermore, US President Joe Biden’s phone call with his Chinese counterpart and readiness to respect the Taiwan agreement also favored the bulls.
However, the Fed tapering concerns and the US Republican Party members’ dissent to abide by the Democratic keep traders on the toes ahead of Friday’s key US Nonfarm Payrolls.
Amid these plays, the US Dollar Index (DXY) keeps the previous day’s upside moves near the 94.00 threshold by the press time while tracking firmer US Treasury yields. However, the S&P 500 Futures remains indecisive at the latest.
Having witnessed an initial reaction to the RBNZ move, NZD/USD traders will pay attention to the risk catalysts and the US ADP Employment Change for September for fresh impulse ahead of Friday’s US Nonfarm Payrolls (NFP).
Read: US ADP Employment Change September Preview: Yes, its all about the Fed
Technical analysis
A daily closing beyond the 0.7010 key resistance, including 50-DMA and a three-week-old descending resistance line becomes necessary for the bulls. On the contrary, a horizontal area encompassing multiple levels marked since June, between 0.6925 and 0.6915, becomes important to watch.
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