The Reserve Bank of New Zealand maintained their Official Cash Rate at 5.50% early this morning, helping ignite a strong buying surge in the NZD/USD.
- Most financial institutions were not surprised this morning by the Reserve Bank of New Zealand’s decision to keep their Official Cash Rate in place.
- The NZD/USD however launched upwards from a depth of nearly 0.61000 which traders were preparing for as the RBNZ Monetary Policy Statement got ready to be published, then went to a height around the 0.61530 ratio in rather quick fashion after the release of the paper.
The reason for the price velocity was likely the confirmation that lending rates would be kept in place. Meaning the RBNZ continued to dance in step with the U.S Federal Reserve, and said that that not enough erosion via New Zealand inflation data has been seen quite yet. The highs seen early today briefly touched values last seen on the 14th of March. However, the last time the NZD/USD had touched the 0.61500 vicinity was when the currency pair was in the midst of a strong selling trend.
Behavioral Sentiment and Bullish Confirmations in the NZD/USD
On the 1st of May the NZD/USD was trading near the 0.58780 ratio, the climb upwards has correlated well to the broad market as global financial institutions have shifted their mid-term outlook regarding the USD. Today’s non-action from the Reserve Bank of New Zealand actually may have helped bolster NZD/USD bullishness because it appears the RBNZ may be intent on only lowering the Official Cash Rate when the Fed lowers the Federal Funds Rate – meaning interest rates could stay aligned philosophically.
Bullish momentum in the NZD/USD certainly did not sustain the early morning highs generated today, but the selloff to the current rate around 0.61200 is still above the launching point from this morning’s lows and support around the 0.61100 should be watched to see if it can prove durable. Later today the U.S will publish their Federal Reserve’s FOMC Meeting Minutes, which is a collection of the notes discussed in the last FOMC decision.
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Speculative Notions and Short-Term Tactics in the NZD/USD
The past few weeks have produced a solid bullish trend for the NZD/USD. Traders who believed the currency pair had been oversold and who have been wagering on upside momentum hopefully have been rewarded. The burst higher this morning was certainly too fast and could not hold onto its loftier values, but it may be a sign that financial institutions believe more upside potential exist.
- Trades should not get over confident, the NZD/USD does have the capability of moving fast and support levels need to be watched.
- If the NZD/USD can maintain its 0.61100 support level, it may continue to spark some potential buying which believes the currency pair should be a bit higher.
NZD/USD Short Term Outlook:
Current Resistance: 0.61235
Current Support: 0.61120
High Target: 0.61370
Low Target: 0.61060
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