NZD/USD forecast and RBNZ interest rate decision preview

By:
on May 19, 2024
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  • The NZD/USD pair has surged to its highest point since March 14th.
  • The rally happened after the US published weak economic numbers last week.
  • The RBNZ will publish its third interest rate decision of the year this week.

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The NZD/USD exchange rate will be in the spotlight this week as investors focus on the upcoming Reserve Bank of New Zealand (RBNZ) interest rate decision. The pair has been in a strong bull run this month as it surged from 0.5852 to near 0.6150, its highest swing since March 14th.

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RBNZ interest rate decision ahead

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The NZD/USD surged hard last week after the weak US economic numbers led to a plunge of the US dollar index (DXY). Data revealed that the building permits and housing starts remained under pressure amid a high-interest rate environment. 

Additional data showed that the US retail sales stalled in April while manufacturing and industrial production retreated in April. In the same month, the headline and core consumer inflation dropped for the first time in months. 

Therefore, the Fed finds itself in a period of stagflation, which is characterised by high inflation and weak economic growth. A previous report showed that the US economy expanded by just 1.6% in the first quarter. As such, the bank may decide to cut interest rates at least two times this year.

The next important catalyst for the NZD/USD exchange rate will be the upcoming Reserve Bank of New Zealand (RBNZ) interest rate decision scheduled for Wednesday.

This meeting will come at a time when New Zealand’s inflation remains at an elevated level while the economy is emerging from a deep dive. The most recent data showed that the headline Consumer Price Index (CPI) dropped to 4.0% in Q1, down from 4.7% in the previous quarter. It had peaked at 7.3% in 2022.

A separate report showed that the economy contracted by 0.3% in Q4, a slight improvement from the previous decline of 0,6%. Therefore, analysts expect that the bank will leave interest rates unchanged and point to a rate cut in the fourth quarter.

NZD/USD technical analysis

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NZD/USD

NZD/USD chart by TradingView

The daily chart shows that the NZD to USD exchange rate has been in a strong bull run in the past few weeks. It recently crossed the crucial resistance level at 0.6080, its highest swing on April 10th.

The pair has flipped the 50-day and 100-day Exponential Moving Averages (EMA), a positive sign. It has also soared above the first resistance of the Woodie pivot point. 

The Relative Strength Index (RSI) and the Relative Vigor Index (RVI) have all jumped to their highest levels in months. Therefore, the pair will likely retest the first Woodie pivot point at 0.6157 and then retreat to the support at 0.6080 after the RBNZ decision. This performance is known as a break and retest pattern.

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