The NZD/USD pair is currently on the verge of a mid-week rally, inching closer to the 0.6116 level. This marks the highest point for the Kiwi in the past two months, attributed to the Reserve Bank of New Zealand’s decision to maintain its monetary policy unchanged in the recent May meeting.
The RBNZ chose to keep the interest rate steady at 5.5% per annum, aligning with market expectations. The central bank justified this decision by the need for a restrictive monetary policy to facilitate a return of inflation to its target range within the designated timeframe.
Key Risks and Support Factors
Despite the positive outlook, the RBNZ has highlighted potential risks such as a cooling labor market and increasing unemployment. On the other hand, support factors like higher housing rents, insurance costs, and rising utility rates are contributing to the overall stability of the Kiwi.
Official forecasts indicate that the consumer price index in New Zealand is projected to return to the 1-3% range by the end of 2024. This optimistic outlook is bolstering the confidence in the NZD exchange rate, pointing towards a potential increase in the near future.
The H4 chart of NZD/USD reveals a consolidation range around the 0.6000 level, with an upward breakout leading to a growth wave to 0.6151. However, a potential downward breakout could see a decline to 0.6000 followed by corrections and further declines along the trend. Technical indicators like the MACD signal line are pointing towards a bearish trend.
On the H1 chart, an impulse of decline to 0.6114 has been observed, with a corrective phase expected to reach 0.6132. This correction might pave the way for a growth wave to 0.6075, signaling a continuation of the upward trajectory.
The NZD/USD pair is experiencing a steady rise, supported by the RBNZ’s balanced monetary policy. While technical indicators suggest potential corrections, the overall trend points towards further growth. Investors are advised to closely monitor the upcoming US Federal Reserve minutes for additional insights and market direction.