The NZD/USD pair is trading below the immediate resistance of 0.6260, as investors await the interest rate decision from the Reserve Bank of New Zealand (RBNZ). The New Zealand Consumer Price Index (CPI) has not yet shown any signs of inflationary pressures peaking, so a continuation of an interest rate hike is expected from RBNZ Governor Adrian Orr. Additionally, a promise of a cyclone relief package of NZ$300 million ($187.08 million) by NZ Prime Minister (PM) Chris Hipkins has triggered fresh concerns about an increment in inflation projections.
The US Dollar Index (DXY) is currently trading above 103.50, however, higher volatility cannot be ruled out as United States markets will open after a holiday-truncated weekend. On Monday, RBNZ’s Shadow Board recommended a 50bps OCR increase citing strong inflationary pressures.
NZD/USD has sensed a decent buying interest after testing the horizontal support plotted from January 3 low around 0.6200 on a four-hour scale. This indicates a Double Bottom chart formation that results in a bullish reversal. The Kiwi asset is attempting to surpass the 20-period Exponential Moving Average (EMA) at 0.6258. Additionally, the Relative Strength Index (RSI) (14) has managed to avoid the bearish range of 20.00-40.00 and has climbed back inside the 40.00-60.00 range.
For further upside, the Kiwi asset needs to surpass January 8 low at 0.6272, which will drive the asset towards January 9 low at 0.6320, followed by February 7 high at 0.6363. Conversely, a breakdown of January 6 low at 0.6193 will drag the asset towards November 28 low at 0.6155. A slippage below the latter will expose the asset for more downside towards the round-level support at 0.6100.
The NZD/USD pair has been trading in a volatile manner ahead of the interest rate decision by the RBNZ. The Kiwi asset has seen a decent buying interest after testing the horizontal support plotted from 0.6200. This indicates a Double Bottom chart formation that results in a bullish reversal. The RBNZ’s Shadow Board recommended a 50bps OCR increase citing strong inflationary pressures, which has further increased the chances of a rate hike.
The US Dollar Index (DXY) is currently trading above 103.50, however, higher volatility cannot be ruled out as United States markets will open after a holiday-truncated weekend. NZD/USD needs to surpass January 8 low at 0.6272, in order to drive the asset towards January 9 low at 0.6320, followed by February 7 high at 0.6363. Conversely, a breakdown of January 6 low at 0.6193 will drag the asset towards November 28 low at 0.6155.
The Relative Strength Index (RSI) (14) has managed to avoid the bearish range of 20.00-40.00 and has climbed back inside the 40.00-60.00 range. This indicates that the Kiwi asset is deploying efforts in surpassing the 20-period Exponential Moving Average (EMA) at 0.6258. A slippage below the round-level support at 0.6100 will open the doors for further downside.
Overall, the NZD/USD pair is likely to remain volatile ahead of the interest rate decision by the RBNZ. The Kiwi asset has sensed a decent buying interest after testing the horizontal support plotted from 0.6200. The release of the helicopter money might propel overall consumer spending and eventually the price pressures. The US Dollar Index (DXY) is currently trading above 103.50, however, higher volatility cannot be ruled out as United States markets will open after a holiday-truncated weekend. The Relative Strength Index (RSI) (14) has managed to avoid the bearish range of 20.00-40.00 and has climbed back inside the 40.00-60.00 range. NZD/USD needs to surpass January 8 low at 0.6272, in order to drive the asset towards January 9 low at 0.6320, followed by February 7 high at 0.6363. Alternatively, a breakdown of January 6 low at 0.6193 will drag the asset towards November 28 low at 0.6155. A slippage below the round-level support at 0.6100 will open the doors for further downside.
