NZD/USD Forex Technical Analysis – Traders Expecting RBNZ to Deliver Big Rate Hike on Wednesday

The New Zealand Dollar is edging lower on Monday, but inside yesterday’s range. Capping the currency is a stronger U.S. Dollar. The limited losses may be attributed to expectations for a hawkish policy update from the Reserve Bank of New Zealand (RBNZ) on Wednesday.

At 06:17 GMT, the NZD/USD is trading .6131, down 0.0019 or -0.31%.

Fed Hawks Limiting Gains

Last week was a busy one for Fed speakers with over a dozen Fed officials offering their latest views on the economy, jobs, inflation and current policy settings.

Most policymakers delivered the clearly hawkish message – inflation has not meaningfully softened, more work is needed, and interest rates will stay higher for longer.

RBNZ Could Go Supersized on Wednesday

Unlike other central banks, the RBNZ could step-up to a 75 basis point hike given the mix of recent strong CPI and jobs numbers and rising inflation expectations.

Financial futures traders are pricing in a 50/50 chance of 75 basis points versus 50 basis points. According to a Reuters poll, however, 15 of 23 economists surveyed predict a 75 basis point rate hike, which would bring the Official Cash Rate to 4.25%.

 Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6206 will reaffirm 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 also shift the momentum.

The minor range is .6065 to .6206. The NZD/USD is currently straddling its pivot at .6136.

On the upside, the nearest resistance is a long-term Fibonacci level at .6232. On the downside, the support is a pair of 50% levels at .6023 and .5990.

Daily Swing Chart Technical Forecast

Trader reaction to .6136 is likely to determine the direction of the NZD/USD on Monday.

Bearish Scenario

A sustained move under .6135 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the minor bottom at .6065. Taking out this level will likely lead to a test of the 50% levels at .6023 and .5990.

Bullish Scenario

A sustained move over .6136 will signal the presence of buyers. If this generates enough upside momentum then look for a test of .6206, followed by the long-term Fibonacci level at .6232. This is a potential trigger point for an acceleration to the upside.