NZD/USD forecast as the RBNZ prepares another rate hike

The NZD/USD price pulled back on Tuesday as investors wait for the upcoming interest rate decision by the Reserve Bank of New Zealand (RBNZ). The pair dropped to a low of 0.6327, which was lower than this month’s high of 0.6467.

RBNZ interest rate decision

The NZD/USD forex price pulled back sharply as the RBNZ monetary policy committee started its policy meeting. Economists polled by Reuters believe that the central bank will decide to hike interest rates by another 0.50%. If this happens, it will bring the headline interest rate to 3%.

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Like other top central banks, the RBNZ has been hiking interest rates in the past few months. It started increasing rates in October last year and has now delivered six straight increases. 

These rate hikes are necessary considering that the country’s economy is doing well while inflation has jumped to a multi-year high. Data published in July showed that the country’s inflation surged to 7.3% in the June quarter. This was the biggest increase in decades and analysts expect that the situation will continue.

Data published last week revealed that New Zealand’s food prices continued rising. The overall food price index rose by 7.4%, led by fruit and vegetables. Other sub-sectors like groceries and meat rose by more than 7%.

At the same time, data published by the statistics agency showed that the unemployment rate dropped to 3.3% in the second quarter. As such, the RBNZ will have some justification to maintain a hawkish tone. 

The NZD/USD will likely drop even after the RBNZ decides to hike interest rates. For one, the rate hike has already been priced in by market participants. On the other hand, the pair will show more volatility if it decides not to hike.

NZD/USD forecast

The four-hour chart shows that the NZD/USD price has been in a bullish trend in the past few weeks. Along the way, the pair formed an ascending channel pattern that is shown in green. 

Recently, however, the pair has pulled back from the upper side of the channel. It has also managed to move below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved below the neutral point.

Therefore, the pair will likely continue falling as sellers target the lower side of the channel at 0.6285. A move above the resistance point at 0.6390 will invalidate the bearish view.