NZD/JPY bears step in after RBNZ dovish hold

• The NZD/JPY is currently trading at 91.84, registering a significant drop of 1% in Wednesday's session.
• The RBNZ's dovish hold during the Asian session significantly weakened the NZD.
• The daily RSI indicates a possible shift in momentum, with NZD/JPY buyer strength declining from the overbought territory near 50..
• A short-term advantage for sellers is evident, with hourly RSI values oscillating near oversold territory.

In Wednesday's session, the NZD/JPY dived towards the 91.84 level, recording a notable decline of 1%. The main driver of this movement was the dovish decision from the Reserve Bank of New Zealand (RBNZ) which contributed to the Kiwi being the weakest currency in the session.

The RBNZ held the rates steady at 5.5%, with a revised outlook reducing the likelihood of another 25 bps hike from 75% to 40%. In addition, the bank cut down near-term Gross Domestic Product (GDP) growth projections, slightly adjusting inflation projections downwards. It expects, however, that inflation will return to the 1-3% target band in Q3 2025, implying the persistence of a tighter monetary policy. As a reaction, the combination of projections of a weaker economic activity with expectations of fewer hikes drove the Kiwi’s selloff.

NZD/JPY technical analysis

The daily Relative Strength Index (RSI) recently slid from the overbought territory and took a big hit in Wednesday’s session. This signals a potential turnaround moment, although the pair maintains a positive outlook within the broader technical landscape, as affirmed by its position above the 20,100,200-day Simple Moving Averages (SMAs). At the same time, the MACD histogram indicated a drop in bullish momentum, as marked by the shrinking green bars.

NZD/JPY daily chart

Interestingly, the hourly RSI values are oscillating within the negative territory, pointing to a short-term advantage for the sellers. Simultaneously, the MACD histogram on the hourly chart suggests the return of bullish momentum, as evidenced by the rising green bars. This hourly divergence hints at some level of intraday volatility for the NZD/JPY pair as indicators seem to be correcting oversold conditions.

NZD/JPY hourly chart