Shorting NZD/USD at the 20 SMA, on Dovish RBNZ Rate Hike Expectations

The New Zealand dollar is looking vulnerable today, having mad me the smallest gains against the USD among major currencies. This comes ahead of the RBNZ meeting later this week, as the traders cut back expectations of an aggressive rate hike by the RBNZ.

There have been a number of events in New Zealand, such as the cyclone, a cooling housing market and a softening economy. So, the expectations for the RBNZ to deliver a hawkish statement after interest rate hike at its meeting on Wednesday continue to be scaled back amid  signs of peaking inflation as well.

The market is now pricing in less than 50 basis points of a rate hike this week to 4.75%, down from 55 basis points a week ago, and 61 basis points a month ago. On the other hand, FED rate hike expectations have been repriced higher in recent weeks, keeping this forex pair under pressure.

NZD/USD H4 Chart – MAs Have Turned Into Resistance

The trend has changed for this pair since early February

NZD/USD fell below 0.62 last week, as the USD advance continued, while risk sentiment was mostly negative on higher FED rates expectations. But, we saw a reversal on Friday, with the USD loosing ground against all major currencies, so the NZD has been taking advantage of that.

But, moving averages which were acting as support during the uptrend have turned into resistance now and the price is trading at the 20 SMA (gray) on the H4 chart. We decided to open a sell forex signal here at this moving average and now are waiting for a reversal back down.

ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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