NZDUSD is pushing back to downside after RBNZ rate hike could not keep upside run going
Overnight, the Reserve Bank of New Zealand raised its Official Cash Rate by 25 basis points to 2.50%, delivering its first rate hike in three years. The Monetary Policy Committee judged that monetary policy remained accommodative and signaled that further rate increases are likely, although the pace and timing will depend on incoming inflation and economic data.
The Committee noted that the partial reopening of the Strait of Hormuz has helped push oil prices lower, easing near-term inflation pressures. Headline inflation is now expected to have peaked at 3.9% in the June quarter, slowing to 3.3% in the September quarter before returning to the 2% target midpoint by mid-2027.
While the RBNZ acknowledged that New Zealand’s economy lost momentum during the June quarter as the earlier oil shock weighed on activity, policymakers expect growth to improve in the September quarter as lower fuel prices support household spending. The Committee also pointed to resilient global growth, underpinned by continued AI-related investment and stronger defense spending.
Committee members remained divided on the inflation outlook. Two members highlighted upside risks from lingering cost pressures and stronger pricing behavior by businesses, while four viewed the risks as broadly balanced, citing soft consumer demand and uncertainty over the strength of the recovery. A weaker New Zealand dollar was also identified as a potential source of imported inflation.
Markets initially interpreted the statement as hawkish, with the explicit guidance that additional tightening is likely sending the New Zealand dollar sharply higher immediately after the announcement. However, the rally quickly lost momentum. Technically, buyers were unable to sustain a break above the 38.2% retracement level at 0.5716. Although the price briefly traded above that resistance, it quickly reversed.
During the North American session, the pair extended to fresh post-decision lows, falling to 0.5674 and moving toward the rising 200-hour moving average at 0.5678. A sustained break below that moving average would hand short-term control back to the sellers and open the door for a move toward the late-June lows, with 0.5625 as an important downside target.
On the topside, the 100-hour moving average at 0.5696 has become the first key resistance. A move back above that level would shift the near-term bias in favor of the buyers and put the 0.5716 retracement level back in focus. For now, the NZDUSD is caught between its 100-hour and 200-hour moving averages, with traders looking for a decisive break of either level to determine the next directional move.
This article was written by fl932d6e52a19643278e0f123bca7198f5 at investinglive.com.