The Reserve Bank of New Zealand (RBNZ) decided on its monetary policy direction a few hours ago and opted to leave interest rates unchanged at 0.25%, building on the country’s relative success in stemming the tide of the coronavirus pandemic. This decision was widely expected and kept to market expectations.
This decision was preceded by the testimony of Fed Chair Jerome Powell, whose dovish comments before US Congressmen has put the US DOllar under pressure. Thus, the upside move was the New Zealand Dollar’s to lose. A period of mild consolidation preceded the RBNZ decision. However, the decision of the RBNZ, citing the strong state of the economy, added momentum to the 4-month bullishness of the New Zealand Dollar and sent the NZDUSD pair rising.
The bank’s Large-Scale Asset Purchase (LSAP). program. was kept intact at NZ$100 billion, meeting market estimates. Analysts are of the opinion that this program could end or at least be scaled back in June 2021. Any changes in the OCR could be preceded by this move.
Traders would be watching the speech of the RBNZ President Orr later on Wednesday to see if he downplays the expected rate increases, which most market analysts feel could happen later in 2021 given the improving economic outlook.
Technical Outlook for NZD/USD
The dovish testimony by Fed Chair Jerome Powell and the slightly hawkish RBNZ allowed the NZD/USD to violate the resistance at 0.73533. The kiwi could extend the uptrend to approach near 34-month highs if RBNZ Chief Orr paints a hawkish picture in his speech later today. This could allow the NZD/USD approach the 0.7400 psychological resistance, with an additional target at 0.74414. Attainment of the latter aids in fulfilling the measured move from the breakout of the bullish pennant on the daily chart.
On the flip side, if the RBNZ Chief indicates that rates will be altered next year (and not in 2021 as widely envisaged), this could prompt a pullback on the pair. Any corrective pullback targets 0,73084 initially, with additional targets at 0.71600 and possibly 0.71004.
NZD/USD Daily Chart