100 Weekly SMA Keeps NZDUSD Down After Hawkish RBNZ
The price action in the USD to NZD rate has been slow week, as markets awaited the RBNZ meeting, however the main trend is bearish.
The price action in the USD to NZD rate has been slow week, as markets awaited the RBNZ meeting, however the main trend is bearish, despite the hawkish outlook. This pair resumed its upward trajectory early this month, with the price breaking over 0.61 following last week’s lower US CPI inflation figures. But the 100 SMA continues to act as resistance on the weekly chart, rejecting the price.
The NZD/USD exchange rate has been on an upward trend since April, showcasing the relative strength of the New Zealand dollar against the US dollar. This trend has been supported by a decline in the US dollar’s value, driven by weaker economic data coming from the United States.
Earlier in May the price of NZD/USD consolidated below the 50-day Simple Moving Average (SMA), which acted as a resistance level during this consolidation phase. But last week week, the upward momentum resumed, with the price moving towards the 100-weekly SMA, a significant resistance level on the this timeframe chart. The price started to reverse back down this week, as NZD traders were waiting for the RBNZ meeting which took place early today.
NZD/USD Chart Weekly – Reversing Down at the 100 Weekly SMA
Breaking through this resistance could signal a continuation of the bullish trend for NZD/USD, while a failure to do so might result in another consolidation phase or a potential pullback below 0.60. Today the RBNZ sounded more hawkish than expected, but after all, they will start to lower rates, so after the first jump in in the NZD/USD pair, the price reversed right at the100 weekly SMA again, which highlights the importance of this technical level in driving the downtrends.
Reserve Bank of New Zealand Monetary Policy Decision
Policy Rates and Forecasts:
- RBNZ leaves cash rate on hold at 5.5%, as widely expected
- Current OCR: 5.61% in September 2024 (up from the previous 5.6%).
- Forecast OCR:
- 5.54% in June 2025 (previously 5.33%).
- 5.4% in September 2025 (previously 5.15%).
- 2.99% in June 2027.
Statement Highlights:
- Monetary Policy Stance: The RBNZ emphasized the need for restrictive monetary policy to control inflation.
- Impact of Restrictive Policy: It has successfully reduced capacity pressures and lowered consumer price inflation.
- Inflation Forecast: Annual consumer price inflation is expected to fall within the target range of 1 to 3 percent by the end of 2024.
- Inflation Drivers: The decline in inflation is partly due to lower prices for imported goods and services. However, domestic services inflation remains persistent.
- Economic Indicators: Wage growth and domestic spending are easing, contributing to reduced inflationary pressures.
- Labour Market: Weaker capacity pressures and an easing labor market are expected to continue reducing domestic inflation.
Minutes Summary:
- Confidence in Policy: Members expressed confidence that the current monetary policy is effectively restricting demand.
- Future Expectations: A further decline in capacity pressure is anticipated, which should support a continued reduction in inflation.
- Interest Rates: The committee agreed that interest rates need to remain at restrictive levels for an extended period to ensure that headline CPI inflation returns to the target range.
- Inflation Target: The committee noted that headline CPI inflation is expected to return to the target band by the December quarter of this year.
NZD/USD Live Chart
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