The RBNZ is expected to raise rates by 50 basis points to 2.5% from 2.0% at 10 PM ET today (Wednesday in New Zealand). The hike will be the 6th in a row which has seen the rate move up from 0.25% to 2.5%. The last 2 hikes have been 50 basis points. The first 3 were 25 basis points.
For previews of the decision, click here and here. Adam points out that Credit Agricole speculates that the risk is that the central bank lowers the OCR peak/terminal rate.
The NZDUSD is trading near it's lowest level since May 24, 2020 week going into the meeting. That low was reached yesterday at 0.6096. The low price today was just above that level at 0.6099.
Looking at the hourly chart, the price has not had a closing bar above its 200 hour moving average since June 27 (green line in the chart above).
Last week on Friday, the price spiked above that moving average line only to close below it on the 2 consecutive hourly bars that moved above. Prior to that, the price had not traded above the 200 hour moving average since June 28 where it once again it failed to close above that moving average line. Currently the 200 hour moving average comes in at 0.61751. Getting above that level after the rate decision will be needed to increase the bullish bias.
Ahead of the 200 hour moving average the lower 100 hour moving average (blue line in the chart above) currently comes in at 0.61536. That moving average has seen a number of breaks over the last 10 trading days. However momentum has eventually faded before the aforementioned 200 hour moving average (green line)
As a result, going into the interest rate decision, if the price can move above the 200 hour moving average, that would tilt the bias more in the direction of the buyers at least in the short-term. Absent that and the buyers are not winning. The sellers remain in full control.
Conversely, on the downside, moving below last week's low at 0.61236 followed by the swing lows from yesterday and today between 0.6096 and 0.6099 would have traders pushing even lower. The sellers would be in firm control as the trend continues and starts to work at the 2020 lows. In the 2020 Covid year, the low for the NZDUSD reached all the way down to 0.5466. So there is still a lot of room to roam on the downside on further/more weakness.
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