The NZD/USD exchange rate drifted downwards to the lowest level since January 6 after Cyclone Gabrielle and ahead of the upcoming RBNZ interest rate decision. It plunged to an intraday low of 0.6200, which was about 4.62% below the highest level this year.
RBNZ interest rate decision
The RBNZ will be the only game in town this week as it is set to deliver its interest rate decision on Wednesday. It will be the first monetary policy meeting of the year. Economists expect that the bank will maintain its hawkish tone by hiking rates by another 0.50%.
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If this happens, it will bring the headline interest rates from 4.25% to 4.75%. Like the Federal Reserve and other central banks, the RBNZ has delivered numerous rate hikes since 2022 in its bid to fight the elevated inflation.
The most recent data showed that the headline consumer price index (CPI) rose by 7.2% in the most recent quarter. It remains significantly higher than the RBNZ target of 2.0%. At the same time, it remains slightly below last year’s high of 7.3%, as I wrote here.
The RBNZ decision comes at a time when New Zealand’s economy is struggling. This performanc pushed Jacinda Arden out as prime minister a few weeks ago. At the same time, the country suffered a major cyclone known as Gabrielle that left eleven people dead and thousands unaccounted for.
Analysts expect that the recovery will cost billions of dollars to repair. In its initial commitment, the government announced that it will spend about $187 million to repair roads in the region. Therefore, it is unclear whether the RBNZ will hike rates amid the ongoing crisis.
The NZD/USD price will also react to several economic data from New Zealand. The statistics agency will publish the latest credit card spending and trade balance data.
NZD/USD forecast
The daily chart shows that the NZD to USD price formed a double-top pattern at around 0.6500. This pattern is usually a bearish sign. Its neckline is at 0.6194 and the pair has moved below the 50-day moving average. The Relative Strength Index (RSI) has continued falling and is below the neutral point.
Therefore, there is a likelihood that the NZD/USD pair will continue falling as sellers target the key support at 0.6100. The stop-loss of this trade will be at 0.6320. On a positive side, the pair has formed an inverted head and shoulders pattern.
Source: https://invezz.com/news/2023/02/20/nzd-usd-forms-a-double-top-ahead-of-rbnz-decision/