RBNZ is raising rates and NZD is depreciating

In the night Reserve Bank of New Zealand (RBNZ) unexpectedly raised interest rates by as much as 50 basis points. Initially, it caused a strengthening of the New Zealand currency, but finally it depreciated. The situation on the NZD / USD chart indicates a risk of further declines.

RBNZ raises interest rates

The Central Bank of New Zealand today raised interest rates by 50 basis points (bp), thereby raising the main rate to 1,50 percent. from 1,00 percent earlier. It was the 4th consecutive rate hike and the largest one-off rate hike in 20 years. The RBNZ is raising rates to contain rising inflation in New Zealand, but above all to prevent second-round effects from emerging.

Today's decision of the RBNZ surprised the market. Because although some of its participants allowed such a move on rates, the market consensus assumed an increase in the cost of money by 25 bp to 1,25 percent. NZD / USD exchange rate In reaction to this higher than expected rate hike, it initially reacted with an increase to 0,6901, but finally the rate turned back and now fell to 0,6817. Investors decided that the communiqué accompanying today's RBNZ decision does not sound as “hawkish” as they expected.

NZD / USD daily chart. Source: Tickmill

Kiwi with a downward trend

The situation on the NZD / USD daily chart, after today's unsuccessful attempt to increase after the RBNZ decision, does not look optimistic for the demand side. While it still has the upper hand, the unsuccessful attempt to end the profit-taking that has been going on for more than a week now heralds an attack on the 2,5-month uptrend line (currently at 0,6805). If such a scenario materialized, the NZD / USD rate could quickly fall to the area of ​​0,6721-0,6728. Because only there is the first significant support zone, which is made up of 68,2 percent. abolition of Fibo and the local low in mid-March.

There is one more factor in favor of the fall in NZD / USD. Namely, the continuation of interest rate hikes by the US Fed, including the rate hike of 50 basis points forecasted at the May meeting. This is an important argument for the strengthening of the USD in the coming weeks. Also for strengthening to NZD.