NZD/USD Forex Technical Analysis – RBNZ Seen Supersizing Official Cash Rate Hike

The New Zealand Dollar is trading higher against its U.S. counterpart on Friday amid reports that the Reserve Bank (RBNZ) will hike rates by 75 basis points for the first time ever on Wednesday to cool multi-decade high inflation, ramping up the speed of an already aggressive monetary tightening campaign, according to a Reuters poll.

At 10:18 GMT, the NZD/USD is trading .6176, up 0.0046 or +0.75%.

Big Banks Expect Supersized Rate Hike

Inflation at 7.20% is well above the Reserve Bank of New Zealand (RBNZ) target range of 1-3%, which, along with a tight labor market has prompted economists to predict a higher peak for the official cash rate (OCR), currently at 3.50%.

The largest banks in the country – ANZ, ASB, Kiwi Bank, Bank of New Zealand and Westpac – expect a 75 bp hike on Wednesday, matching the recent pace of the U.S. Federal Reserve. Interest rate futures are pricing a roughly 60% chance of that happening.

“Since the RBNZ’s last decision in October, inflation and expectations of inflation have surprised on the upside,” said Jarrod Kerr, chief economist at Kiwibank. “And wage growth is accelerating.”

“We expect to see an outsized 75 bp hike to 4.25%, and they won’t stop there,” he added. “We’re likely to see a 5% cash rate next year.”

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6203 will signal a resumption of the uptrend. A move through .5841 will change the main trend to down.

The minor trend is also up. A trade through .6065 will change the minor trend to down. This will shift momentum to the downside.

The minor range is .6203 to .6065. The NZD/USD is currently trading on the bullish side of its pivot at .6134, making it support.

On the upside, the nearest resistance is a long-term Fibonacci level at .6232. On the downside, the key support is at .5990.

Daily Swing Chart Technical Forecast

Trader reaction to .6134 is likely to determine the direction of the NZD/USD on Friday.

Bullish Scenario

A sustained move over .6134 will indicate the presence of buyers. The first upside target is the minor top at .6203, followed by .6232 and a main top at .6251. The latter is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under .6134 will signal the presence of sellers. This could trigger a break into the minor bottom at .6065, followed by a 50% level at .5991.