NZD/USD forecast as the RNBZ gears for more hikes

By: Crispus Nyaga
Crispus Nyaga
Crispus is a Financial Analyst for Invezz covering the stock, cryptocurrency and forex markets. He’s an experienced analyst with… read more.
on May 25, 2022
  • The NZD/USD pair has been in a strong bullish trend lately.
  • The RBNZ decided to hike interest rates on Wednesday.
  • Officials warned that more hikes were on the way.

The NZD/USD price continued grinding on Wednesday after the latest interest rate decision by the Reserve Bank of New Zealand (RBNZ). The pair rose to a multi-week high of 0.6510, which was about 4.70% above the lowest level this month.

RBNZ interest rate decision

The RBNZ delivered a relatively hawkish interest rate decision on Wednesday as the battle against inflation continued.

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As was widely expected, the bank decided to hike interest rates by 0.50% to 2.0%. This was the third time that the central bank has hiked interest rates since the pandemic started. 

In his statement, the central bank’s governor said that more tightening will happen soon in order to bring inflation within the 1-3% range. Recent data showed that the country’s inflation surged to more than 5% in Q1 as the cost of energy rose.

The rate hikes were also needed considering that the country’s economy has emerged from the pandemic at a better state than many peers. Household balance sheets have kept rising as the unemployment rate has declined to a record low. 

Similarly, balance of trade has been strong considering that the country’s exports are in high demand overseas. The statement added:

“The Committee viewed the projected path of the OCR as consistent with achieving their primary inflation and employment objectives without causing unnecessary instability in output, interest rates and the exchange rate.”

The next key catalyst for the NZD/USD pair will be the upcoming minutes by the Federal Reserve. The minutes will provide more color about the thinking of Fed’s officials on interest rates. Recently, the Fed chair has insisted that the bank will continue hiking interest rates. It will also start lowering its balance sheet.

NZD/USD forecast

NZD/USD

The four-hour chart shows that the NZD/USD pair has been in a strong bullish trend in the past few days. Along the way, the pair is approaching the 38.2% Fibonacci retracement level. It has also moved above the 25-day moving average.

The pair has formed an ascending channel shown in black. It is now between this channel while the Relative Strength Index (RSI) has been in a strong upward trend. 

Therefore, the pair will likely keep rising as bulls target the key resistance level at 0.6540. A drop below the support at 0.6435 will invalidate the bullish view.

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