NZD/USD forecast as RBNZ starts a rate hike cycle
- The NZD/USD pair declined slightly after the latest RBNZ rate decision.
- The bank decided to hike interest rates as the economy recovers.
- We explain the next key levels to watch in the near term.
The NZD/USD price retreated even after the Reserve Bank of New Zealand (RBNZ) became the second major central bank to hike rates. The pair fell to an intraday low of 0.6933, which was relatively lower than this week’s high of 0.6980.
The RBNZ concluded its two-day monetary policy meeting and did what most analysts were expecting. The bank decided to further tighten its monetary conditions as the country’s economy bounces back.
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Precisely, the RBNZ decided to hike interest rates from 0.25% to 0.50%. As a result, it became the second major central bank after Norges Bank to hike rates.
The bank said that the rate hike was necessary in order to maintain low inflation and support maximum sustainable employment. Still, it expects that inflation will keep rising and hit 4% and then return towards its target of 2% in the near term.
The bank also expects that financial conditions, which worsened during the recent lockdowns, will show some improvements. The statement said:
“While the economy contracted sharply during the recent nationwide health-related lockdown, household and business balance sheet strength, ongoing fiscal policy support, and a strong terms of trade provide confidence that economic activity will recover quickly as alert level restrictions ease.”
Looking ahead, the next key catalysts for the NZD/USD will be the American jobs numbers that will start coming out today. The ADP Institute will publish its estimate of jobs numbers on Wednesday. Economists expect the data to show that the private sector created more jobs in September than they did in August.
On Thursday, the Bureau of Labour Statistics (BLS) will publish the latest jobs initial jobless claims numbers. They will be followed by the non-farm payrolls data on Friday.
The NZD/USD declined to a low of 0.6933 after the RBNZ rate hike. The decline happened because the rate hike was already priced in. On the four-hour chart, the pair has formed a double-top pattern and moved below the 61.8% Fibonacci retracement level. Therefore, the pair will likely keep falling as bears target the next key support level at 0.6900.
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