NZD/USD Surges to Falling Trendline after the RBNZ Statement

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NZD/USD Surges to Falling Trendline after the RBNZ Statement

As we get ready for the 12/11 session, the RBNZ has revealed its latest monetary policy decision, which is to hold the official cash rate at 3.50%. It remains in the “assessment period”. The market is expecting the next rate hike to be in the second half of 2015.

Official RBNZ Statement

Reaction to the RBNZ Statement: The statement was was mixed, but there does seem to be some optimism in terms of growth and inflation forecast. The market reacted with sharp NZD-buying. The NZD/USD for example rallied sharply from 0.7675 to 0.7825 in the hour of the release.

NZD/USD 4H Chart 12/11
nzdusd 4h chart 12/11
(click to enlarge)

Resistance: As the NZD/USD rallies, it will be testing a speedline coming down from a November’s high at 0.7973. This might give some near-term resistance, and if there is a reaction, we should monitor the bearish attempt.

If the market holds above the 0.7725-0.7750 area, the bullish correction outlook is still in play. There is still upside risk towards the 0.79 level, given a neutral to bearish USD. If the USD strengthens this week, today’s RBNZ statement is not likely to have enough impact in turning the NZD/USD bullish. It will need the help of the USD paring its recent gains.

The thing is, if price does break above 0.79, then we can say that NZD/USD is shifting from a bearish to neutral mode.

NZD/USD Daily Chart 12/11
nzdusd daily chart 12/11
(click to enlarge)

Levels and Outlook:

The daily chart shows that if price breaks above 0.79, it might also break above a falling trendline from a resistance in October at 0.8033. Now, in a consolidation mode, NZD/USD has upside risk limited to 0.80-0.8033 area, and the downside risk limited to the 0.7650-0.77 area, just above the actual low on the year at 0.7608.

If will take a break above 0.81 to start the consideration for a bullish market, or at least a bullish correction towards the 0.83-0.84 area, which is where the 200-day SMA as well as the 61.8% retracement (0.8367) reside.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.