NZD/USD Price Forecast: Struggles to return above 20-day EMA
- NZD/USD jumps to near 0.5972 as the NZD gains from RBNZ Silk’s hawkish comments.
- RBNZ’s Silk has commented that the next move in interest rates will likely be a hike.
- Investors shift focus to the preliminary US Q4 GDP data.
The NZD/USD pair is up 0.11% to near 0.5972 during the European trading session on Thursday after gauging temporary ground near 0.5958. The Kiwi pair edges higher as the New Zealand (NZD) gains slightly, following hawkish comments from Reserve Bank of New Zealand (RBNZ) Assistant Governor Karen Silk.
Earlier in the day, RBNZ’s Silk said in an interview with Reuters that the next move in interest rates “will likely be up”. Silk’s hawkish comments were backed by upside inflation risks. “Uncertainty over the path of inflation and consumer demand meant there are still risks on both sides,” Silk said.
On Wednesday, the New Zealand Dollar (NZD) fell sharply as the RBNZ left its Official Cash Rate (OCR) steady at 2.25%, as expected, but didn’t advocate interest rate hikes in the near term. “Not planning to hike until we see a stronger economy, more inflationary pressure,” RBNZ Governor Anna Breman said.
Meanwhile, the US Dollar (USD) trades broadly firm ahead of the release of the preliminary United States (US) Q4 Gross Domestic Product (GDP) data on Friday. Economists expect the US economy to have grown at a moderate pace of 3% Year-on-Year (YoY) against the prior reading of 4.4%.
NZD/USD technical analysis
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NZD/USD trades marginally higher at around 0.5973 as of writing. The 14-day Relative Strength Index (RSI) at 51 (neutral) after retreating from overbought confirms momentum has cooled.
Price holds just below the 20-period Exponential Moving Average (EMA) at 0.5988, whose slope has moderated after a steady climb.
This positioning caps the recovery and points to consolidation as the pair digests prior gains. The pair could turn fragile and slide towards the January 23 low of 0.5891 if it extends its decline below the February 6 low of 0.5928.
On the contrary, a decisive close back above the 20-EMA could reassert the uptrend and extend the recovery toward the February 18 high of 0.6054.
(The technical analysis of this story was written with the help of an AI tool.)
RBNZ FAQs
The Reserve Bank of New Zealand (RBNZ) is the country’s central bank. Its economic objectives are achieving and maintaining price stability – achieved when inflation, measured by the Consumer Price Index (CPI), falls within the band of between 1% and 3% – and supporting maximum sustainable employment.
The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee (MPC) decides the appropriate level of the Official Cash Rate (OCR) according to its objectives. When inflation is above target, the bank will attempt to tame it by raising its key OCR, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the New Zealand Dollar (NZD) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken NZD.
Employment is important for the Reserve Bank of New Zealand (RBNZ) because a tight labor market can fuel inflation. The RBNZ’s goal of “maximum sustainable employment” is defined as the highest use of labor resources that can be sustained over time without creating an acceleration in inflation. “When employment is at its maximum sustainable level, there will be low and stable inflation. However, if employment is above the maximum sustainable level for too long, it will eventually cause prices to rise more and more quickly, requiring the MPC to raise interest rates to keep inflation under control,” the bank says.
In extreme situations, the Reserve Bank of New Zealand (RBNZ) can enact a monetary policy tool called Quantitative Easing. QE is the process by which the RBNZ prints local currency and uses it to buy assets – usually government or corporate bonds – from banks and other financial institutions with the aim to increase the domestic money supply and spur economic activity. QE usually results in a weaker New Zealand Dollar (NZD). QE is a last resort when simply lowering interest rates is unlikely to achieve the objectives of the central bank. The RBNZ used it during the Covid-19 pandemic.
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