The Reserve Bank of New Zealand concluded its monetary policy meeting as the 3/12 global session began. The RBNZ decided to hold its official cash rate (OCR) at 3.50%. ( It has been at 3.50% since July 2014, when the RBNZ raised it from 3.25%) The hold was widely expected, but some central bank watchers have started to anticipate a more dovish tone that would open the door for a rate cut. Instead, bank governor Graeme Wheeler delivered a very neutral statement.
(click to enlarge; source: forexfactory.com)
Against the prevailing dovish expectations, the market reacted with some NZD buying. The NZD/USD has been consolidating since February when it marked the 2015-low at 0.7176. It retreated from 0.76 in March, and was almost back to the low on the year when the RBNZ’s statement gave kiwi-us dollar a boost.
The 4H chart shows a bullish engulfing candle that engulfed the 3/11 session decline. Price is not threatening March’s falling speedline. If resistance holds here, up to the 0.7350 area, the bearish outlook is still pervasive, especially if the 4H RSI holds under 60.
Above that, the market might still be bearish. A break above the 0.74-0.75 area might be needed to dissuade NZD/USD-bears. This area involves the cluster of 200-, 100-, and 50-period SMAs, as well as a previous support/resistance pivot area. This would open up the 0.76 high, with risk of pushing towards the next common resistance around 0.7850 as we can see in the daily chart below.
Let’s wait for the 3/12 session to close. If the daily candle can close above 0.7350, there would be a 3-candle reversal combination. In that scenario, let’s limit the bullish outlook to 0.74-0.75 since the prevailing trend is bearish after all. But, we should be prepared for another bullish correction push if price fails to hold below 0.75.
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