NZD/USD Price Analysis: Surrenders majority of hawkish RBNZ-induced gains

  • NZD/USD retreats to 0.6100 but still holds hawkish RBNZ-inspired gains.
  • The RBNZ said the decision on rate cuts will be delayed amid headwinds of persistent price pressures.
  • Investors await the FOMC minutes to project the next move in the US Dollar.

The NZD/USD pair falls sharply to near the crucial support of 0.6100 in Wednesday’s European session. Earlier, the Kiwi asset rose vertically to 0.6150 after the Reserve Bank of New Zealand (RBNZ) delivered a hawkish interest rate outlook post keeping its Official Cash Rate (OCR) steady at 5.5% for the seventh time in a row.

The New Zealand Dollar still holds significant gains against the US Dollar amid firm speculation that the RBNZ will start reducing interest rates later than the Federal Reserve (Fed). In the press conference, RBNZ Governor Adrian Orr cautioned a potential delay in interest rate cuts due to sticky price pressures. In the monetary policy statement, the RBNZ commented that inflation is expected to return to the 1%-3% band by the year-end.

Meanwhile, the US Dollar Index (DXY) rises to 104.70 ahead of the release of the Federal Open Market Committee (FOMC) that will provide more cues on United States interest rate path. The US Dollar remains well-supported above 104.40 from last few trading sessions as Fed officials continue supporting for interest rates remaining at their current levels for a longer period.

NZD/USD remains firm after a breakout of the Falling Channel formation on a daily timeframe. The Kiwi asset extends recovery to 50% Fibonacci retracement (plotted from December 26 high at 0.6410 to April 19 low around 0.5850) at 0.6130.

The 14-period Relative Strength Index (RSI) has shifted comfortably into the bullish range of 60.00-80.00, suggesting that the momentum has leaned toward the upside.

An upside move above February 9 high of 0.6160 will drive the asset towards 61.8% Fibo retracement at 0.6200, followed by January 15 high near 0.6250

On the contrary, fresh downside would appear if the asset breaks below April 4 high around 0.6050 This would drag the asset towards the psychological support of 0.6000 and April 25 high at 0.5969.

NZD/USD daily chart

Economic Indicator

RBNZ Interest Rate Decision

The Reserve Bank of New Zealand (RBNZ) announces its interest rate decision after its seven scheduled annual policy meetings. If the RBNZ is hawkish and sees inflationary pressures rising, it raises the Official Cash Rate (OCR) to bring inflation down. This is positive for the New Zealand Dollar (NZD) since higher interest rates attract more capital inflows. Likewise, if it reaches the view that inflation is too low it lowers the OCR, which tends to weaken NZD.

Read more.

Last release: Wed May 22, 2024 02:00

Frequency: Irregular

Actual: 5.5%

Consensus: 5.5%

Previous: 5.5%

Source: Reserve Bank of New Zealand

The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish. The policy announcements are usually followed by Governor Adrian Orr’s press conference.


Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content

Recommended content

Editors’ Picks

AUD/USD consolidates near 0.6650 ahead of US data, Fedspeak

AUD/USD consolidates near 0.6650 ahead of US data, Fedspeak

AUD/USD is consolidating the previous rebound near 0.6650 in Tuesday's European morning. The pair fails to capitalize on improved Australian sentiment data and a risk-on mood, as the focus shifts to the US data and Fedspeak for fresh trading impetus. 


USD/JPY remains offered near 159.50 amid Japanese verbal intervention

USD/JPY remains offered near 159.50 amid Japanese verbal intervention

USD/JPY stays pressured near 159.50 early Tuesday, as the Japanese Yen benefited from the verbal intervention. Japan's Hayashi said he will closely monitor the FX moves and take necessary steps. Meanwhile, the US Dollar licks its wounds ahead of sentiment data. 


Gold price retreats from two-week highs amid cautious Fed rhetoric

Gold price retreats from two-week highs amid cautious Fed rhetoric

Gold price trades in negative territory on Tuesday despite the weaker Greenback. The stronger-than-expected US Purchasing Managers Index released last week triggered Federal Reserve officials to push out the timing of the first interest rate cut this year, which continues to cap the gold’s upside.

Gold News

Bitcoin may be set for a price rebound amid alleged Trump's plan to speak at Bitcoin convention

Bitcoin may be set for a price rebound amid alleged Trump's plan to speak at Bitcoin convention

Bitcoin's price dropped below the $60K level briefly on Monday following news of defunct exchange Mt Gox beginning to pay its creditors in July. However, Santiment data reveals that the recent spike in social volume of the phrase "bottom" could signal a potential price rebound.

Read more

Trading the week ahead

Trading the week ahead

Starting Tuesday, we're watching the Canadian CPI print closely. The Bank of Canada's recent minutes suggested hesitation about the last rate cut, hinting they might delay further cuts. This makes the upcoming inflation data crucial.

Read more