RBNZ Preview – Technical Analysis for NZD/USD

Talking Points

Reserve Bank of New Zealand – Official Cash Rate

Daily Chart Technical Analysis

1 – Hour Chart Technical Analysis

Reserve Bank of New Zealand – OCR

The RBNZ interest rate decision, monetary policy statement, and press conference are scheduled for tonight; the official cash rate in New Zealand is 5.50%, and according to Westpac as well as a few banks, RBNZ is expected to hold rates at their current level in line with the FED and other major central banks globally. The RBNZ’s latest monetary policy statement published in November 2023 highlighted that “The Monetary Policy Committee agreed that interest rates will need to remain at a restrictive level for a sustained period of time so that consumer price inflation returns to target and to support maximum sustainable employment.” Inflation in New Zealand continues to decline, reaching a YOY level of 4.65 compared to 3.09 in the United States; however, it remains high and has yet to reach RBNZ’s target range of 1% – 3%.

Earlier in January 2024, ANZ Research anticipated that RBNZ would begin steady cuts in August; however, this opinion was recently updated. ANZ expects OCR to be at 6% by April of 2024. ANZ NZ Chief Economist Sharon Zollner said, “NZ and US inflation is pretty highly correlated,” she said. “In fact, New Zealand pricing intentions explained US inflation better than it does our own!” “If the Reserve Bank does follow through and hike in February, despite the fact that the economy is obviously weak… I think that would certainly get some international attention.”

The New Zealand Dollar rose from 0.6040 to 0.6218 over the past three weeks ahead of RBNZ, possibly pricing in the probability of any potential rate hike; however, it has retraced back to 0.6160 since then.

Please review the economic calendar for all releases and local times.

Daily Chart Technical Analysis

• Price action remains near its monthly pivot point of 0.6170 ahead of the RBNZ Interest rate decision.
• Price is currently finding support at its intersection with EMA and SMA9 and is still above the intermediate MA21.
• The %K line attempts to cross below the %D line on smoothed Stochastic (28 2 6). However, it can simply reflect the most recent decline in price.
• Price attempts to form multiple bottom formations (Or an inverted complex Head and Shoulders); the formation baseline acted as a resistance near 0.6200 as the price attempted to break above it during yesterday’s trading session. The daily candle where the price was met by resistance formed a bearish engulfing pattern, thus making the candle high a critical level ahead of any upside price action.

1 – Hour Chart Technical Analysis

• The one-hour chart reflects an uptrend that began on February 13th, 2024 (Green line). The trend was interrupted, and currently, price action is trading within a flag formation (Blue lines); the upper side of the flag formation intersects with the daily pivot point at 0.6180, and a break and a close above the upper side of the flag formation are required ahead of any upside price action. The upper and lower sides of the flag formation may be critical for any further price action.
• A hammer candle stick formation found support above S1 standard calculations at 0.6160, making it a critical level to watch.
• A positive divergence can be seen on the chart as price action is making lower lows while RSI is plotting higher lows (Red lines).