RBNZ turning to Hawkish policy
Even though NZDUSD corrected a bit lower during North American Season TO 0.7285 after an earlier high to 0.7315, Kiwi is still trying to close at its highest level since February 26. The Kiwi printed the best performer on Wednesday among G10 currencies so far.
Earlier today, RBNZ held its monetary policy meeting and interest rate decision, as well as governer "Andrian Orr" press conference right after that. In the press conference, Mr. Orr said that "the economical price pressures are now expected to be only temporary, and the business sector is showing signs of increasing investment." And he added, "that RBNZ is confident in using the rate projection (OCR) as a future guide to the market."
New Zealand is a prosperous country in the virus elimination that helped them in their economic recovery. As we were expecting, they joined Norway and Canada, beginning to plan rate rises. While RBNZ holds its current 0.25% rate and the LSAP program (NZD 100 billion large-scale asset purchase program), the Bank projected a policy rate of 0.25% in September 2021, up to 0.31% in June 2022, and projected to rise by 0.49% in September 2022 and 1.78% in June 2024.
Also, the RBNZ revised its inflation expectation to 1.5% for June 2022, comparing the previous estimate of 1.4%. Same as the FED, RBNZ council members also emphasized that since it will take time to get full recovery and feel confident with inflation and employment rates, they will be committed to supporting the currency and market.
In short, since New Zealand published economic data getting more robust in the past months, unemployment lowerd to 4.7%. It was expected to see more strict tones in the statement. This Hawkish tone helped the Kiwi gain rapidly today, and a close above 0.7300 can open the door for more gains.
Technical overview:
As it is still above the 20 and 50 HMA and the trend line, it is likely to see more gain, even after a correction. On the flip side, a decline under 0.7225 (Pivot point) with the more substantial move of USD, before Friday's PCE data, can discount the bullish tone. Breathing once again above third resistance at 0.73 will put the March high (0.7315) in the spotlight, and then a 2021 high of 0.7465 will be the next target.
