The Reserve Bank of New Zealand held its official cash rate at 3.50%. While it assured that there will be more rate hikes to come, it explained it needs a period of time to observe the economy after the 100-basis-points increase we have seen in 2014. Bank governor Graeme Wheeler did say that the Kiwi was too high, and that he expects the exchange rate to fall along with commodity prices. Let’s take a look at the NZD/USD and NZD/JPY charts.
NZD/USD has been bearish before the RBNZ statement, and remains so, but is very tentative. Oversold conditions and shaky price action suggests a possible consolidation or bullish correction ahead. However, we should limit any bullish outlook to the very short-term, as there is still downside risk towards the low on the year. NZD/JPY retreated after the RBNZ statement, but remaisn in a bullish channel. A break below this channel seen in the 4H chart would be a break below a flag pattern seen in the daily chart, which would give us a bearish continuation signal.
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