NZD/USD Forex Technical Analysis – Weaker on Expectations of Smaller RBNZ Rate Hike in February

James Hyerczyk
Updated: Jan 25, 2023, 06:49 UTC

The inflation news is prompting traders to bet that cash rate increases over the coming months might be less aggressive than previously thought.


In this article:

The New Zealand Dollar is edging lower on Wednesday after a report showed fourth-quarter inflation rose less than what the Reserve Bank (RBNZ) had forecast. The news is prompting traders to bet that cash rate increases over the coming months might be less aggressive than previously thought.

At 06:27 GMT, the NZD/USD is trading .6494, down 0.0011 or -0.17%.

Consumer inflation held near three-decade highs last quarter but came in below the central bank’s forecast. Annual inflation ran at 7.2% in the fourth quarter unchanged from the third quarter and just below a three-decade high, Statistics New Zealand said in a statement on Wednesday.

Inflation was slightly above economists’ expectations in a Reuters poll for a 7.1% annual rise but was below the RBNZ’s forecast of 7.5% inflation. On a quarter-on-quarter basis, the consumer price index (CPI) rose 1.4%, following a 2.2% increase in the third quarter.

After the release of the CPI data, both ANZ and Kiwibank now expect the RBNZ to increase the cash rate by 50 basis points in February rather than a 75 basis point increase.

The NZD/USD weakened but didn’t collapse after the report because a 50 basis point rate hike by the RBNZ will still be larger than the widely expected 25 basis point rate hike by the Fed on Feb. 1.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6530 will trigger a resumption of the uptrend, while a move through the June 3 main top at .6576 will reaffirm the uptrend. A trade through .6191 will change the main trend to down.

The minor trend is also up. A trade though .6366 will change the minor trend to down. This will shift momentum to the downside.

The NZD/USD is currently trading on the strong side of a long-term 50% level at .6467, making it support. The nearest resistance is the main top at .6576.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term 50% level at .6467 will determine the direction of the NZD/USD on Wednesday.

Bullish Scenario

A sustained move over .6467 will indicate the presence of buyers. If this generates enough upside momentum then look for a surge into the last minor top at .6530. Taking out this level could extend the rally into .6576.

Bearish Scenario

A sustained move under .6467 will signal the presence of sellers. The first target is a minor pivot at .6448. Look for buyers on the first test of this level, but if it fails then look for the selling to possibly accelerate to the downside with the support cluster at .6366 – .6360 the next target.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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