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NZD/USD Forex Technical Analysis – Some Questioning RBNZ Rate Hike Expectations

The New Zealand Dollar is edging higher on Monday on well-below average volume. Despite the rebound from near-two year lows reached last week, the currency remains at risk due to worries over a global economic recession. For weeks, investors have been shedding riskier assets like stocks and commodity-linked currencies like the Kiwi.

At 07:39 GMT, the NZD/USD is trading .6237, up 0.0033 or +0.53%.

Even with the Reserve Bank of New Zealand (RBNZ) expected to hike its 2.0% cash rate by 50 basis points in July and August, gains are likely to be capped by .6362 to .6396.

Some traders are questioning whether the RBNZ can raise rates aggressively because the economic data has been weak enough for the market to lower the expected peak for rates.


“The July meeting would mark the third straight 50bp hike, but similar to offshore central banks, the RBNZ may soften its tone around the outlook, acknowledging the waning strength in the forward activity indicators.”


Short-Term Outlook

Trader reaction to the long-term Fibonacci level at .6232 is likely to determine the direction of the NZD/USD on Monday.

Bearish Scenario

A sustained move under .6231 will signal the presence of sellers. The first downside target is a minor pivot at .6197. If this fails to hold then look for the selling to possibly extend into Friday’s low at .6148.

The daily chart indicates there is plenty of room to the downside with the May 15, 2020 main bottom at .5921 the next major target. This makes .6148 a potential trigger point for an acceleration to the downside.

Bullish Scenario

A sustained move over .6232 will indicate the presence of buyers. If this move attracts enough counter-trend buyers then look for a surge into another pivot at .6272.

With the NZD/USD in a downtrend, look for sellers to return on the first test of .6272. If the counter-trend buyers can overcome this level then look for the rally to possibly extend into the short-term 50% level at .6362.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire