The NZD/USD pair has reached a nearly three-week high of 0.6030 during Monday’s North American trading session, driven by strong performance of the New Zealand Dollar (NZD) ahead of the Reserve Bank of New Zealand’s (RBNZ) monetary policy announcement scheduled for Wednesday.
Market expectations suggest that the RBNZ will maintain its Official Cash Rate (OCR) at 5.5%, prompting investors to focus on the central bank’s interest rate guidance.
Recently, the New Zealand Institute of Economic Research (NZIER) conducted a “shadow board” exercise, revealing a split among analysts regarding a potential rate cut in August. While some analysts favor a slight rate cut to prevent further economic slowdown, others are waiting for more evidence of easing inflation.
On the other hand, the US Dollar (USD) is trading sideways as market participants await the release of the US Consumer Price Index (CPI) data for July on Wednesday. The US Dollar Index (DXY) remains range-bound above 103.00 against a basket of major currencies.
In terms of technical analysis, the NZD/USD pair is struggling to break above the immediate resistance zone of 0.6037-0.6046 on the daily chart. However, the asset has bounced back above the 20-day Exponential Moving Average (EMA) at 0.5990, indicating a bullish near-term outlook. Further upside potential lies in stabilizing above the 50-day EMA around 0.6030.
The 14-day Relative Strength Index (RSI) has returned to the neutral zone, suggesting that bearish momentum has subsided.
If the NZD/USD pair decisively surpasses the May 3 high at 0.6046, it could target the highs near 0.6100 and 0.6127. Conversely, a downside move below the April 19 low of 0.5850 may lead to a decline towards the key support levels at 0.5800 and 0.5770.
NZD/USD Daily Chart
Economic Indicator: RBNZ Interest Rate Decision
The Reserve Bank of New Zealand (RBNZ) is set to announce its interest rate decision following its scheduled policy meeting. A hawkish stance from the RBNZ, indicating rising inflationary pressures, could lead to an increase in the Official Cash Rate (OCR), attracting more capital inflows to strengthen the NZD. Conversely, a dovish outlook with concerns about low inflation may prompt a rate cut, potentially weakening the NZD.
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Analysis:
The NZD/USD pair is on the rise, fueled by optimism ahead of the RBNZ’s policy decision. While the RBNZ is expected to maintain its OCR, the interest rate guidance will be closely watched by investors. On the other hand, the US Dollar remains range-bound as the market awaits the US CPI data release. Technical indicators suggest a bullish near-term outlook for the NZD/USD pair, with potential resistance levels above current prices. Traders should monitor key support and resistance levels for trading opportunities based on the upcoming events and data releases.