The New Zealand dollar tumbled as RBNZD leaves rates unchanged in May. A glimpse at NZDUSD daily technical outlook post RBNZD meeting for what to expect next.
11 May, AtoZForex –The New Zealand dollar (Kiwi) was the best performing pair on Wednesday. The spot traded higher against all major pairs pre RBNZD meeting. The strength was on the back of investors optimism from the RBNZD as tightening bias was favored. However, The New Zealand Dollar was heavily dumped against its major counterparts after the RBNZ held rates unchanged in May as widely expected. Investors were hopeful of a positive tone from the central bank due to recent positive economic news-flow out of the nation. Consumer spending was on the positive side as the labor market has witnessed improvements on every side. Dairy prices and inflation are also on the rise.
Generally, the New Zealand economy is quite healthy according to data reports. However, RBNZD Wheeler and his team had a diverging view. RBZND said that the increase in headline price growth was mainly due to higher tradable inflation, particularly petrol and food prices. This was viewed as only temporary and that it may lead to some variability over the year ahead. However, the longer-term view is that prices are anchored at around 2 percent.
Going forward, the central bank reiterated that monetary policy will remain accommodative for a considerable period. The RBNZ forecasts that the average official cash rate will rise in the third quarter of 2019. The market was looking at the possibility of tightening earlier but hopes of any near-term rate hikes seemed to be totally out of context with today’s meeting outcome.
NZDUSD daily technical outlook post RBNZD meeting; Daily Chart
NZDUSD daily technical outlook post RBNZD meeting (Click to zoom)
NZDUSD tumbled over 100 points after the RBNZD's meeting. From the daily technical standpoint, this move wasn't a surprise at all. Fundamental just stepped in as a fuel needed for the spot to complete its daily sequence. For those who have been an ardent follower of our analysis, we had pointed out a much needed corrective rally to the 0.6950 zone before the next move lower to complete the daily cycle. Having fulfilled the corrective rally anticipated, the final decline to 0.6770-50s to end the daily cycle is in progress. However, weakness could be coming to an end especially around the 0.6750s region (bottom of the channel). If the channel bottom defends bears and bulls steps in, a big rally could be brewing.As always, we shall keep you abreast of the happenings around that price zone soonest.
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