During the Asian session on Wednesday, NZD/USD recovered slightly from the 0.5930 area, the lowest since November 2022, buoyed by the hawkish outlook of the Reserve Bank of New Zealand (RBNZ). NZD/USD is currently trading around the 0.5960-0.5965 area, up 0.20% on the day and appears to have broken a six-day losing streak.
The Reserve Bank of New Zealand left interest rates unchanged, as expected, and kept the key official cash rate (OCR) steady at 5.50%. In the accompanying monetary policy statement, the RBNZ said interest rates would remain at restrictive levels for some time. In addition, the Reserve Bank of New Zealand now forecasts that the official cash rate will be 5.5% by December 2024, falling to 3.38% by September 2026. This in turn provided some support for NZD/USD which, combined with a weaker USD, prompted some short covering in the NZD/USD pair.
However, NZD/USD upside remains capped, at least for now, as traders seem reluctant to make aggressive bets now, preferring to wait for the release of the Fed minutes. The Federal Reserve (Fed) is expected to pause its rate-hike cycle at its September policy meeting, although markets have been pricing in a 25 basis point rate hike by the end of the year. As such, the minutes will be closely watched for clues on the Fed’s rate hike path ahead, which will influence USD price dynamics and provide fresh directional momentum for the NZD/USD pair.
From a technical point of view, NZD/USD recently fell below the previous year-to-date low below the 0.6000 psychological level, which is seen as a fresh trigger for bearish traders. That said, the RSI on the daily chart is slightly oversold, boosting NZD/USD to hold the lower edge of a three-week-old downtrend channel and rebound. The above-mentioned support level is currently around 0.5930-0.5925, which should be a key point. If NZD/USD breaks clearly below this level, it will continue the decline of the past more than a month.
Meanwhile, NZD/USD’s subsequent rebound is likely to encounter strong resistance near the overnight swing high (before the 0.6000 mark). Sustained strength could trigger short covering, rally to 0.6040 resistance, then 0.6065-0.6070 area. The 0.6065-0.6070 area converges with the resistance of the ascending channel. If NZD/USD breaks through this resistance, the bearish outlook will be invalidated, and the short-term tends to be bullish. NZD/USD may break through the round-number mark of 0.6100 and retest the monthly high around 0.6130-0.6135.