RBNZ hawkish hints supported the New Zealand dollar.
A quite interesting currency pair, namely the NZD/USD, will be considered today, especially since the reason for this is extremely suitable. After its regular meeting, the Reserve Bank of New Zealand (RBNZ) decided not to change the key interest rate and keep it at 0.25%, as well as to leave the volume of the asset purchase program unchanged. Since this decision coincided with market expectations, we will focus on the comments of RBNZ Governor Adrian Orr. According to the New Zealand regulator, it is currently inappropriate to change the parameters of monetary policy when the economy has not yet fully recovered from the shock caused by the COVID-19 pandemic.
If the economy continues to maintain the current pace of recovery, and even more so improves them, an increase in the main interest rate may take place as early as the second half of 2022. Given the current global demand for raw materials, export prices are showing growth, and inflation in the second quarter has already reached 2.6%. Andrian Orr noted that the inflationary component at this stage is in the focus of attention of both financial markets and the world's leading Central Banks. If inflation continues to rise in New Zealand, the RBNZ will have to raise rates to contain it. These comments provided significant support for the New Zealand dollar. Now, let's turn our attention to the weekly time frame.
Weekly TF:
After the growth to the range of 0.5466-0.7461, the NZD/USD pair corrected slightly below the first pullback level of 23.6 on the Fibonacci grid, extended for this upward movement. This was followed by the attempts of the NZD bulls to continue the growth of quotes, but they encountered strong resistance from sellers near the significant and important technical level of 0.7300. Earlier, the New Zealand dollar is actively strengthening, with bullish traders retesting the level of 0.7300.
It can be assumed that the closing of the current weekly trading above this level will create good prerequisites for the continuation of the upward dynamics of the NZD/USD pair. In turn, the appearance of a weekly candlestick with a long upper shadow that exceeds the size of the body itself will be a bearish signal, which will be further confirmed by the closing of weekly trading below the red Tenkan line and the blue Kijun line of the Ichimoku indicator. At the moment, it is Tenkan and Kijun that provide strong support to the price, hindering it to further decline.
Daily TF:
The outlook in the daily time frame is not much different from the one on the weekly time frame. Here, we have the same strong and important level of 0.7300, which the pair is currently trying to break through, and the same Tenkan and Kijun lines of the Ichimoku indicator, which provide the quote with quite strong support.
It is clear that today's growth can be linked to the comments of the RBNZ about a possible increase in interest rates in the second half of next year. This is the case so far, but a lot can change throughout the year. One can never know what will happen, so it can be assumed that the current growth of the pair is unlikely to be long-term. The market will quickly play back the hawkish statement of the RBNZ, after which it will switch to its usual trading mode, where much will depend on the position of the US dollar across the entire range of currencies. Therefore, it is quite risky to buy now after such strong growth, and even at the breakdown of the strong level of 0.7300. As an alternative, I suggest waiting for the consolidation of three consecutive candles above the level of 0.7300 on this or smaller time frames. After that, it is possible to consider opening long positions with the nearest targets set at 0.7340, 0.7380, and 0.7400. Naturally, all this will become relevant only if the breakdown of the 0.7300 level is confirmed. In the meantime, we will take a wait-and-see attitude.
