NZD/USD: New Zealand Dollar grinds below 0.6200 despite Reserve Bank of New Zealand’s hawkish play (2024)

• NZD/USD remains mildly bid even as Reserve Bank of New Zealand announced 75 bps lift in the benchmark interest rate.
• Fears of recession, China Covid woes challenge New Zealand Dollar buyers.
• Multiple statistics from the United States, Minutes of the latest US Federal Reserve (Fed) meetings will offer clear directions.

NZD/USD pares the Reserve Bank of New Zealand (RBNZ) inspired gains as it retreats to 0.6160 heading into Wednesday’s European session. In doing so, the New Zealand Dollar (NZD) struggles to cheer hawkish moves of the RBNZ amid mixed sentiment and cautious mood ahead of the key data/events.

The New Zealand Dollar’s latest weakness could be linked to the fears of recession spread by downbeat comments from the RBNZ Governor Adrian Orr.

Reserve Bank of New Zealand failed to impress New Zealand Dollar buyers

Reserve Bank of New Zealand matched market forecasts while announcing 75 basis points (bps) of a rate hike during its updates to convey the tenth interest rate lift on Thursday. The RBNZ also raised inflation forecasts during its quarterly economic projections while suggesting a peak Official Cash Rate (OCR) of 5.5%, versus 4.25% at the latest.

As a result, the New Zealand Dollar traders should have seen the central bank’s move as utterly hawkish due to not only the pace of the rate increase but the predictions for the OCR peak as well.

It should be noted, however, that downbeat economic forecasts suggesting New Zealand’s recession in 2023 and sour comments from New Zealand Finance Minister Grant Robertson also challenged the New Zealand Dollar buyers.

That said, New Zealand’s 10-year Treasury bond yields jumped 3.87% intraday to 4.30% following the RBNZ move while Auckland’s benchmark equity index NZX50 dropped 0.70% intraday by the press time.

China’s Covid woes, and pre-event anxiety also challenge NZD/USD bulls

China’s daily coronavirus counts head towards the record top marked in April while the virus numbers from Beijing, Shanghai and Chongqing also increased. On the same line were headlines from the South China Morning Post (SCMP) quoting Nomura’s Chief Economist Lu Ting as saying, “China’s economic growth next year appears to entirely hinge on a potential exit from its zero-covid policy, and even if such a shift occurs, more pain is inevitable before the real recovery.” Hence, Covid woes appear a drag for the New Zealand Dollar.

On the other hand, the scheduled releases of flash readings of November’s activity numbers for the US will precede the US Durable Goods Order for October and the Federal Open Market Committee (FOMC) Meeting Minutes also keep the New Zealand Dollar traders on the edge. The reason could be linked to the recently mixed messages from the United Stated economic data and comments from the Federal Reserve (Fed) officials.

Clues for Federal Reserve’s 50 bps rate hike could tease New Zealand Dollar bears

While most of the scheduled data from the US are less likely to offer any clear signals, unless providing strong numbers, the New Zealand Dollar traders will pay attention to the Minutes of the latest Federal Reserve Meeting for clear directions. Should the Fed convey increasing odds of easing the rate hike bias, the Kiwi Dollar may have a reason to remain firmer. Otherwise, a pullback can’t be ruled out.

NZD/USD price technical analysis

NZD/USD remains inside a one-week-old trading range between 0.6210 and 0.6060, despite the Reserve Bank of New Zealand (RBNZ) inspired moves.

In addition to the aforementioned trading range, the 200-day Exponential Moving Average (EMA) also adds strength to the 0.6210 hurdle for the New Zealand Dollar buyers.

It’s worth noting, however, that the lower highs on the Relative Strength Index (RSI) placed at 14 also challenge the Kiwi pair’s short-term upside. Even so, the bullish signals from the Moving Average Convergence and Divergence (MACD) indicator keep the New Zealand Dollar on the buyer’s radar.

On the flip side, pullback moves have multiple barriers to challenge the NZD/USD traders, apart from the bottom of the previously mentioned range near 0.6060.

Among them, the 100-day EMA level surrounding 0.6020 could initially challenge the New Zealand Dollar bears before highlighting the 0.6000 psychological magnet and an upward-sloping trend line from October 13, close to 0.5950 at the latest.

Overall, NZD/USD remains on the buyer’s radar unless the New Zealand Dollar sellers break 0.5950 support.

NZD/USD: Daily chart

Trend: Bullish