RBNZD Holds rates, says Kiwi too expensive : Has NZDUSD topped?

RBNZD Holds rates, says Kiwi too expensive. The RBNZD kept its rate on hold as expected, but the central bank was obviously worried about its soaring Kiwi. Can we say the NZDUSD has topped?

09 February, AtoZForex – The New Zealand dollar dropped like a rock after the Reserve Bank of New Zealand warned against the strength of its currency.

In its statement, RBNZD wrote “New Zealand’s financial conditions have firmed with long-term interest rates rising and continued upward pressure on the New Zealand dollar exchange rate.  The exchange rate remains higher than is sustainable for balanced growth and, together with low global inflation, continues to generate negative inflation in the tradable sector.  A decline in the exchange rate is needed”.

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The RBNZ statement talks more about global uncertainty than a higher inflation paradigm.The statement sent the kiwi lower because there was none of the hawkishness that crept into the central bank vocabulary from November through January. Wheeler spelled it out by saying that the market got ahead of itself in pricing in a 2017 rate hike. Overall, he said the likelihood of rates moving up or down was equal.

Technical Analysis of the NZDUSD

RBNZD Holds rates, says Kiwi too expensive NZDUSD D (Click to zoom)

The New Zealand dollar as evident on the daily chart was way long due for a collapse but kept running weak stops. All technical posture right from the monthly down to the 4 hourly time frame are all in tandem and therefore speaks the same bear language. RBNZD was indeed a much-needed fuel to commence something constructive with our bias.

Looking at the daily chart above, the party was over for NZDUSD bull run when a red flag (caution) showed up dressed in form of a Pin bar (Tuesday's daily close). Not just that, a trend line connecting the low of may and October 2016 was seen to be capping the stops hunting attempt by the kiwi. As long as the 0.7330 keeps holding as resistance, 0.7050 should be a more beautiful level for our first profit taking. Watch out for our comprehensive report on the NZDUSD from monthly down to daily time frames and possible swing opportunity for the long term traders.

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