Chart of the day - NZDUSD (05.04.2023)

NZDUSD enjoys elevated volatility following a bigger-than-expected rate hike from Reserve Bank of New Zealand (RBNZ). RBNZ announced a 50 basis point rate hike on Wednesday, pushing the official cash rate to 5.25%. This comes after a 50 basis point rate hike in February. Money markets as well as economists expected RBNZ to slow pace of tightening to 25 bp rate hikes at a meeting today but no such thing took place. Moreover, RBNZ noted in a statement that further tightening will be needed to bring inflation down to 1-3% target. Inflation in New Zealand stood at 7.2% YoY in Q4 2022. RBNZ peak rate expectations have moved from 5.25% in July to 5.4% in August.

As the RBNZ decision and rhetoric turned out to be much more hawkish than expected, it should not come as a surprise that the New Zealand dollar caught a bid. NZDUSD broke above the rising wedge pattern and rallied further until it ran into the 0.6363 resistance zone. Bulls failed to break through this resistance and a pullback was launched with the pair pulling back to 0.6310 support. The pair has traded around this level since.

Should bulls regain control, another attempt at breaking the aforementioned resistance zone cannot be ruled out. However, if sellers remain in control, a drop towards the 0.6273 may be on the cards.

NZDUSD at H1 interval. Source: xStation5