NZD/USD has spiked as the market reacts to the interest rate decision by the Reserve Bank of New Zealand (RBNZ). As economists has expected, the central bank has left the cash rate unchanged at 0.25%. Besides, it will continue with the $72.2 billion (NZD 100 billion) asset purchasing program as part of its accommodative policy.
The bank further hinted at hiking the cash rate to 0.5% from Q3’22. However, it has insisted that the forecasts are largely dependent on the prevalent economic conditions.
NZD/USD is also finding support in the weakening US dollar. On Tuesday, the US new home sales data came in lower than expected at 863,000 compared to the forecasted 970,000. Furthermore, inflation concerns pushed May’s consumer confidence to 117.2. Analysts had expected a reading of 119.2, which was higher than April’s 117.5.
NZDUSD Technical Outlook
As a reaction to the RBNZ interest rate decision, NZD/USD has surged by 1.14% to 0.7311. Earlier on, the currency pair was at 0.7223. On a four-hour chart, it is trading above the five and ten-week exponential moving averages. Notably, the 25-day EMA has crossed over the 50-day EMA to the upside.
With an RSI of 71, NZD/USD has entered the overbought territory. I expect the pair to pull back to 0.7290 before moving higher to its next target at 0.7345. However, a move below that support level will invalidate this thesis.