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NZD/USD forecast ahead of the RBNZ decision

on Nov 21, 2022
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  • The NZD/USD pair has formed a double-top pattern.
  • Focus shifts to the upcoming RBNZ interest rate decision.
  • Analysts expect that the bank will hike by a record 0.75%.

The NZD/USD exchange rate moved sideways on Monday as investors wait for the upcoming interest rate decision by the Reserve Bank of New Zealand (RBNZ). It retreated to a low of 0.6113, which was slightly below this month’s high of 0.6200.

RBNZ rate decision preview

The NZD to USD exchange rate recovery paused ahead of the RBNZ decision scheduled for Wednesday. Economists expect that the central bank will hike rates by a record 75 basis points. The bank has been hiking interest rates in the past eight straight meetings.

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It started hiking interest rates in October last year when rates were at 0.50%. Since then, rates have jumped to 3.50%. Therefore, a 75 basis point rate hike will push the headline interest rates to 4.25%.

An extremely hawkish RBNZ will be diverging from other central banks. In its neighboring Australia, the Reserve Bank of Australia (RBA) has been slowing its rate hikes. It has hiked rates by 0.25% in the past two straight meetings. 

The RBNZ rate hikes will be because of the soaring inflation. The most recent data showed that the headline consumer price index (CPI) rose to 7.20%, which is significantly above the bank’s target range of 1-3%. The unemployment rate has dropped to about 3.3%.

The NZD/USD price retreated after the relatively weak credit card spending data. According to the statistics agency, card spending rose by 24.8% in October, which was lower than the previous month’s 34%.

The next key forex news will be the latest New Zealand trade numbers scheduled for October. Economists expect that the country’s trade deficit widened to $1.7 billion.

The NZD/USD price will also react to the latest Federal Open Market Committee (FOMC) minutes scheduled for Wednesday. These minutes will provide more colour on the deliberations by Fed officials.

NZD/USD forecast

NZD/USD chart by TradingView

The four-hour chart shows that the NZD/USD pair has been in a strong bullish trend in the past few weeks. It has formed a small double-top pattern at 0.6203. The neckline of this pattern is at 0.6067. It has also moved to the 25-day and 50-day moving averages.

The Relative Strength Index (RSI) has moved below the neutral level. It has moved below the upper side of the ascending channel. Therefore, the pair will likely continue falling as sellers target the next key support level at 0.600.