AUD/NZD analysis as it goes parabolic after the RBNZ decision
- The RBNZ decided to hike rates by 0.25% in its May meeting.
- It pushed rates to 5.25%, the highest point in 14 years.
- The bank also hinted that it had reached the terminal rate.
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The AUD/NZD exchange rate went parabolic on Wednesday after the latest interest rate decision by the Reserve Bank of New Zealand (RBNZ). The pair jumped to a high of 1.0698, the highest level since May 16 of this year. It has soared by over 1.3% from the lowest level this week.
RBNZ interest rate decision
The RBNZ concluded its two-day meeting on Wednesday and decided to hike interest rates by 0.25% as I predicted in this article. It pushed rates to 5.25%, the highest level in 14 years as it continued fighting the elevated inflation. Notably, it was also the 12th straight interest rate hike by the Fed.
In a statement, the bank reiterated that inflation remained substantially high and that rates will need to be restrictive for a while. At the same time, the bank believes that interest rates have peaked, which explains why the AUD/NZD pair jumped. The RBNZ statement said:
“The Monetary Policy Committee reached a consensus that interest rates will need to remain at a restrictive level for the foreseeable future, to ensure consumer price inflation returns to the 1 to 3% target range while supporting maximum sustainable employment.”
In Australia, the RBA has hinted that it will deliver at least one more rate hike. In its meeting this week, the bank decided to hike rates by 025% after pausing in the previous two meetings.
The RBNZ expects that interest rates will remain at this level until 2024 when it will start cutting rates. Some analysts believe that these cuts will come earlier if the country sinks into a mild recession as most analysts expect.
AUD/NZD price forecast
The AUDUSD exchange rate has been moving in a downward trend in the past few weeks. It dropped from last month’s high of 1.0931 to a low of 1.0560. Now, the pair has jumped sharply after the latest RBNZ decision.
On the 4H chart, the pair has moved above the first resistance of the Woodie pivot point and the 50-period moving average. It also jumped above the key resistance point at 1.060, the lowest level on May 11. The Stochastic RSI has moved close to the overbought level of 80.
Therefore, I suspect that the pair will retreat as buyers take profits and as the impact of the RBNZ decision fades. If this happens, the pair will likely retest the Woodie pivot point at 1.0638.
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