NZD/USD forecast ahead of the RBNZ meeting, FOMC minutes

August 13, 2023 08:15 AM PDT | By Invezz

NZD/USD forecast ahead of the RBNZ meeting, FOMC minutes — Image source: Invezz

RBNZ rate hike ahead

One of the biggest forex news this week will be the upcoming interest rate decision by the RBNZ. The decision, scheduled for Wednesday, will come at a difficult time for New Zealand’s economy.

Recent data revealed that New Zealand has moved into a recession as internal and external demand wanes. The economy contracted by 0.1% in the March quarter and analysts expect that the weakness continued in Q2.

New Zealand’s inflation is also at an elevated level. The most recent data revealed that the headline consumer price index (CPI) rose by 1.1% in Q2. And last week, data showed that inflation expectations rose to 2.83% in Q3.

Therefore, the RBNZ is in a tough spot where it needs to hike rates to fight inflation while the economy is contracting. The balancing thing will be for the bank to leave rates unchanged at 5.50% as it has done in the past two meetings. New Zealand’s rates have been rising from 0.25% in August 2021.

The next important NZD/USD news to watch will be the upcoming FOMC minutes on Wednesday. These minutes will provide more color about the last meeting where the bank decided to hike interest rates by 0.25%.

The minutes will come after the US published encouraging inflation numbers. The data revealed that the headline inflation rose to 3.2% while core prices fell to 4.7% in July. As a result, some analysts believe that the Fed will pause its rate hikes for the rest of the year.

NZD/USD technical analysis

The NZD to USD exchange rate has been in a strong bearish trend in the past few days. It is hovering at the important support level since it was also the lowest swing on May 31st. The pair has also dropped below the 25-day and 50-day moving averages.

Further, the Relative Strength Index (RSI) has moved below the neutral point and is nearing the oversold level. Therefore, there are two potential scenarios ahead of the RBNZ decision. First, the sell-off could continue, pushing the pair to the next support at 0.5900. The alternative situation is where the pair will rebound and retest the resistance level at 0.6200.

The post NZD/USD forecast ahead of the RBNZ meeting, FOMC minutes appeared first on Invezz.

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