NZD/USD: RBNZ Fired a Hawkish Missile

  • RBNZ has maintained the OCR at 5.50% for the fourth consecutive time and matched market consensus.
  • Hawkish forward guidance by RBNZ where its latest projected terminal rate of the OCR has been revised upwards to 5.69% (Sep 2024) from 5.57% projected earlier in the August 2023 MPS.
  • The Kiwi rallied by +0.90% intraday against the US dollar and outperformed other major currencies.
  • No clear signs of bullish exhaustion in NZD/USD from a technical analysis perspective, short to medium-term uptrend phases remain intact.

The Kiwi has staged a whopping intraday rally of +0.90% against the US dollar at this time of the writing during today’s (29 November) Asian session and outperformed the other major currencies; (JPY/USD +0.30%, GBP/USD +0.14%, EUR/USD +0.07%, AUD/USD -0.06%).

NZD has outperformed against other major currencies

Fig 1: Rolling 1-month performance of US dollar against major currencies as of 29 Nov 2023 (Source: TradingView, click to enlarge chart)

Also based on a rolling one-month performance, the dollar has weakened the most against the Kiwi versus the other major currencies where the USD/NZD plummeted to -6.05%

Interestingly, the current resilient bullish tone seen in the NZD/USD has remained intact despite the New Zealand central bank, RBNZ maintaining its official cash rate (OCR) at 5.5% in today’s monetary policy meeting for the fourth consecutive time and in line with market consensus.

Hawkish press conference with upward OCR projection

Fig 2: Latest RBNZ Official Cash Rate projection as of 29 November 2023 (Source: RBNZ website, click to enlarge chart)

RBNZ governor Orr has peppered his press conference speech with several hawkish vibes; officials discussed raising the OCR today, the risk to New Zealand’s inflation is still skewed towards the upside, expressed concerns that inflation has been outside the targeted band for a significant period and longer-term inflation expectations have remained on an upward trajectory.

Also, RBNZ has raised its latest expected peak OCR projection on its current interest rate hike cycle to hit 5.69% in September 2024, up from 5.57% projected earlier during the August 2023 monetary policy meeting. This latest set of projections suggests the OCR has not reached its terminal level, and another potential hike may come in the next meeting on 28 February 2024.

Bulls of NZD/USD eying the 0.6240 major resistance with a risk of minor pull-back

Fig 3: NZD/USD medium-term trend as of 29 Nov 2023 (Source: TradingView, click to enlarge chart)

Fig 4: NZD/USD minor short-term trend as of 29 Nov 2023 (Source: TradingView, click to enlarge chart)

The current medium to short-term uptrend phases in place since the 26 October 2023 swing low of 0.5770 has led the daily RSI momentum indicator of the NZD/USD to reach an overbought level but no clear bearish divergence condition yet.

These observations suggest that medium-term upside momentum remains intact which reduces the risk of a multi-week bearish reversal.

In the shorter time frame as seen on the hourly chart, the current intraday rally from Tuesday, 28 November minor low to today’s 29 November current intraday high of 0.6208 has reached an overstretched condition, its steepest move since the 14 November 2023 low to the 15 November 2023 high upswing.

Therefore, the NZD/USD may see a minor pull-back towards 0.6130, and as long as the 0.6070 key short-term pivotal support holds (also the 200-day moving average), the minor short-term uptrend phase from the 14 November 2023 low remains intact.

A clearance above 0.6240 sees the next intermediate resistances coming in at 0.6315 and 0.6380.

On the other hand, failure to hold at 0.6070 may trigger a minor corrective decline towards the next immediate supports of 0.6000 and 0.5950 (also the upward slopping 20 and 50-day moving averages).

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