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That has seen calls for a 75 bps rate hike by the RBNZ next month come in as Eamonn pointed out here. In turn, the kiwi pulled higher against the dollar, with NZD/USD moving up from 0.5635 earlier in the day to test 0.5700 earlier. The dollar is steadying itself to start the session, so we are seeing the pair keep around 0.5680 now – still up 0.9% on the day though.
The push higher is also helped out by the more positive risk sentiment in broader markets but that optimism is fading among major currencies with the aussie and loonie turning flat against the greenback now. Going back to NZD/USD, the monthly chart offers a better view of the current situation:
The pair is hanging on to support closer to 0.5600 for now, which coincides with the trendline support (white line) from the 2009 and 2020 lows. The latter came amid the pandemic rout, with the low hitting 0.5469 but the daily close managing to come back above the 0.5600 mark. As such, we are treading near a critical support point for NZD/USD in the past two weeks.
As much as there is some scope for the kiwi to gain from a more hawkish RBNZ, the Fed remains undaunting and the main driver in the central bank race at the moment. Couple that with the continued pressure on stocks and risk trades, the outlook remains tough for NZD/USD to really turn things around.
It would require a push back above 0.6000 to really convince of any major rebound. Otherwise, these tepid bounces are likely to be met with further selling and more so if equities hit the skids as and when the key support region here breaks.
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