NZD/USD Outlook
NZD/USD continues to bounce around the 50-Day SMA (0.6275) after registering a fresh monthly high (0.6298) on the last trading day for March, and the Reserve Bank of New Zealand (RBNZ) interest rate decision may keep the exchange rate above the moving average as the central bank appears to be on track to implement a more restrictive policy.
NZD/USD forecast: RBNZ rate decision in focus
NZD/USD may disregard the negative slope in the 50-Day SMA (0.6275) as the Federal Reserve adjusts its forward guidance for monetary policy, and the US Dollar may face headwinds ahead of the next interest rate decision on May 3 as the central bank appears to be at or nearing the end of its hiking-cycle.
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Meanwhile, the RBNZ is expected to increase the official cash rate (OCR) by 25bp as the central bank warns that ‘high inflation remains broad-based,’ and Governor Adrian Orr and Co. may continue to prepare New Zealand households and businesses for higher interest rates as the ‘Committee agreed that monetary conditions need to tighten further.’
In turn, a 25bp RBNZ rate hike along with a hawkish forward guidance may generate a bullish reaction in the New Zealand Dollar as the most recent Monetary Policy Statement (MPS) reflects the OCR topping out just below 6.00%. However, hints of a looming change in regime may drag on NZD/USD should Governor Orr and Co. consider a lower trajectory for the OCR.
With that said, the RBNZ rate decision may sway the near-term outlook for NZD/USD as the central bank is expected to implement a more restrictive policy, and the exchange rate may disregard the negative slope in the 50-Day SMA (0.6275) as it takes out the March high (0.6298).
New Zealand Dollar Price Chart – NZD/USD Daily
Chart Prepared by David Song, Strategist; NZD/USD on TradingView
- NZD/USD clears the March high (0.6298) as it trades back above the 50-Day SMA (0.6275), with a close above the 0.6260 (38.2% Fibonacci extension) to 0.6270 (38.2% Fibonacci retracement) area raising the scope for a move towards the 0.6380 (23.6% Fibonacci extension) to 0.6430 (23.6% Fibonacci extension) region.
- Next area of interest comes in around 0.6510 (50% Fibonacci retracement) to 0.6570 (38.2% Fibonacci extension), which lines up with the February high (0.6548), but the exchange rate may respond to the negative slope in the moving average if it struggles to test the 0.6380 (23.6% Fibonacci extension) to 0.6430 (23.6% Fibonacci extension) region.
- Need a move below the 0.6260 (38.2% Fibonacci extension) to 0.6270 (38.2% Fibonacci retracement) area to bring 0.6170 (50% Fibonacci extension) back on the radar, with a move below the 200-Day SMA (0.6159) raising the scope for a test of the March low (0.6085).
--- Written by David Song, Strategist
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