NZDJPY has been trending lower on its 4-hour time frame, moving inside a descending channel connecting the highs and lows since February. Price made a strong rally following the RBNZ decision but might encounter resistance at the longer-term channel top around 76.50.
If that area keeps gains in check, price could head back towards the channel support at 72.00. Stochastic is already indicating overbought conditions, which means that Kiwi bulls are starting to feel tired and may let sellers take over. Similarly, RSI has also reached the overbought area.
Once these oscillators turn down, Kiwi bears could get back in the game and push for at least a move towards the mid-channel area of interest at 74.00. The 100 SMA is below the 200 SMA for now but looks ready for an upward crossover to indicate stronger bullish momentum.
The RBNZ decided to keep interest rates unchanged at 2.25% in today’s rate statement even as several analysts had been expecting a cut. Governor Wheeler mentioned that inflation expectations have stabilized and that the output gap has closed for now.
He added that there may be one more rate cut on the horizon but that could change depending on economic developments. For now, he reiterated that their current policy stance is appropriate and they don’t feel the need to ease again just yet.
Meanwhile, the Japanese yen has regained a bit of ground in the Asian session following a downbeat CPI release from China. The annual reading fell from 2.3% to 2.0% to show weaker price pressures but the PPI came in better than expected.
As for Japan, core machinery orders slumped 11.0%, hinting at weaker production activity in the coming months. Japanese PPI and tertiary industry activity data are up for release in the next Asian session and downbeat results could keep a lid on risk-taking.
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