During European trading on Tuesday, the NZD/USD currency pair dipped by 0.2%, reaching around 0.5690. The New Zealand dollar (NZD) seems to be struggling against other currencies as traders await the Reserve Bank of New Zealand’s (RBNZ) monetary policy announcement set for Wednesday.
There’s a strong anticipation that the RBNZ will increase interest rates by 25 basis points (bps), bringing them to 2.5%. Investors will likely be keen to hear any new insights from RBNZ Governor Anna Breman during the subsequent press conference regarding future monetary policy direction.
At a previous meeting in May, Breman hinted that the central bank might raise interest rates more aggressively to tackle inflation. “The Committee is focused on bringing inflation back to target while keeping the economy stable,” she noted.
Meanwhile, the US dollar (USD) is showing gains ahead of the release of the minutes from the June Federal Open Market Committee (FOMC) meeting on Wednesday. Market participants will closely examine these minutes for indications about the Federal Reserve’s monetary policy approach.
As of this writing, the US Dollar Index (DXY)—which measures the dollar’s performance against six major currencies—was around 100.95, reflecting a 0.1% increase.
NZD/USD technical analysis
The NZD/USD pair has slipped to about 0.5688, maintaining a bearish outlook as it trades below the 20-period exponential moving average (EMA) of 0.5724.
This lack of recovery signals that any potential rallies may be weak. The Relative Strength Index (RSI) stands at 39, which is below the neutral threshold of 50, indicating continued bearish momentum instead of an oversold market.
In terms of resistance, short-term challenges appear around the 20-period EMA at 0.5724. On the flip side, support levels to watch are near the June 26 low of 0.5626 and the November 21 low of 0.5580.
Economic indicators
RBNZ interest rate decision
The Reserve Bank of New Zealand (RBNZ) announces interest rate decisions at its seven scheduled policy meetings each year. If the RBNZ takes a hawkish stance due to rising inflationary pressures, it might increase the Official Cash Rate (OCR) to manage inflation. This would positively impact the NZD, as higher rates typically attract more capital. Conversely, a view that inflation is too low could lead to a lowering of the OCR, weakening the New Zealand dollar.
