New Zealand Dollar Remains Strong With All Eyes on RBNZ Rate Decision

• The New Zealand Dollar (NZD) extended its gains in early Asian trading on Wednesday.
• Improved risk sentiment and a softer US Dollar support the NZD/USD pair.
• Market participants are awaiting the RBNZ interest rate decision, with no rate changes expected.

The New Zealand Dollar (NZD) extends the rally against the weakened US Dollar on Wednesday. Increased optimism in risk sentiment has kept the US Dollar (USD) under pressure in the previous sessions and created a tailwind for the pair. Signs of increased demand from China also support the Kiwi as China is New Zealand’s largest trading partner.

However, heightened geopolitical tensions in the Middle East could limit the NZD’s upside. All eyes will be on the Reserve Bank of New Zealand’s (RBNZ) interest rate decision on Wednesday at 02:00 GMT. The New Zealand central bank is likely to hold its Official Cash Rate (OCR) at 5.50% at its August meeting. The policy decision looks to be a “tight call” between holding and cutting as inflation expectations fall. Traders will take further cues from the press conference, with dovish comments from RBNZ Governor Adrian Orr potentially weighing on the Kiwi. Later in the day, the US July Consumer Price Index (CPI) will be in focus.

Daily Market Movers Roundup: New Zealand Dollar Strengthens Ahead of RBNZ Rate Decision

• Swap markets imply a near 70% chance that the RBNZ will cut the cash rate by 25 basis points (bps) to 5.25%. Markets are pricing in 90 bps of easing this year and another 148 bps in 2025.
• The Producer Price Index (PPI) for final demand in the U.S. rose 2.2% year-on-year in July from 2.7% in June, the Bureau of Labor Statistics showed on Tuesday. This was below the market expectation of 2.3%. On a monthly basis, the PPI rose 0.1% month-on-month in the same period after rising an unrevised 0.2% in June.
• The annual core PPI was softer than expected, rising 2.4% in July but missing an estimate of 2.7%. On a monthly basis, the core PPI was unchanged.
• Investors expect a 25 basis point (bps) rate cut in September, followed by similar reductions in November and December. A 50 bps cut in September is possible but entirely dependent on data.
• Atlanta Fed President Raphael Bostic said Tuesday that recent economic data made him “more confident” that the Fed can bring inflation back to its 2% target. Still, more evidence is needed before he is ready to support cutting interest rates, according to Reuters.

Technical Analysis: New Zealand Dollar Resumes Bullish Bias

The New Zealand Dollar is trading on a firmer note on the day. However, the NZD/USD pair has resumed its uptrend since the price crossed above the 100-day exponential moving average (EMA) and broke above the downtrend line on the daily chart. The 14-day Relative Strength Index (RSI) is above the midline near 61.00, suggesting that the bullish momentum is present and the support level is likely to hold rather than break.

The immediate resistance level for NZD/USD emerges in the region of 0.6090-0.6100, representing the upper boundary of the Bollinger Band and the psychological mark. A decisive break above this level could potentially take the price to 0.6154, a high of July 8.

On the other hand, the resistance-turned-support level at 0.6050 acts as an initial support level for the pair. Any further selling below the mentioned level would expose 0.5977, a low of August 8.