NZDUSD enjoys elevated volatility following a bigger-than-expected rate hike from Reserve Bank of New Zealand (RBNZ). RBNZ announced a 50 basis point rate hike on Wednesday, pushing the official cash rate to 5.25%. This comes after a 50 basis point rate hike in February. Money markets as well as economists expected RBNZ to slow pace of tightening to 25 bp rate hikes at a meeting today but no such thing took place. Moreover, RBNZ noted in a statement that further tightening will be needed to bring inflation down to 1-3% target. Inflation in New Zealand stood at 7.2% YoY in Q4 2022. RBNZ peak rate expectations have moved from 5.25% in July to 5.4% in August.
As the RBNZ decision and rhetoric turned out to be much more hawkish than expected, it should not come as a surprise that the New Zealand dollar caught a bid. NZDUSD broke above the rising wedge pattern and rallied further until it ran into the 0.6363 resistance zone. Bulls failed to break through this resistance and a pullback was launched with the pair pulling back to 0.6310 support. The pair has traded around this level since.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appShould bulls regain control, another attempt at breaking the aforementioned resistance zone cannot be ruled out. However, if sellers remain in control, a drop towards the 0.6273 may be on the cards.
NZDUSD at H1 interval. Source: xStation5
