NZD/USD clings to post-RBNZ gains near multi-month highs, focus on FOMC minutes

• NZD/USD climbs back to a multi-month high after the RBNZ announced its monetary policy decision.
• Some selling around the USD provides an additional boost to the pair.
• The RBNZ’s warning of a deeper economic downturn keeps any significant upside capped.
• Traders also seem reticent ahead of important US macro data and FOMC minutes.

The pair NZD/USD It rose on Wednesday and is nearing a multi-month high in reaction to a more hawkish stance from the Reserve Bank of New Zealand (RBNZ). The pair maintains its buying tone during the first part of the European sessionwith the bulls still waiting for sustained strength beyond the 0.6200 level before positioning for further gains.

As expected, the RBNZ raised its benchmark rate by a record 75 basis points, up to 4.25% (the highest since the 2008 financial crisis) and provided a good boost to the national currency. This, along with some US dollar selling, is seen as a tailwind for the NZD/USD pair. Despite the supporting factors, no buying after RBNZ warning of possible near-term economic downturn.

In addition, investors continue concerned about a new outbreak of COVID-19 in China and the imposition of new lockdown measures. This, along with fears of a further escalation in the Russia-Ukraine conflict, is seen as a headwind for the risk-sensitive NZD. The dollar, for its part, remains on the defensive given expectations that the Fed will slow down the rate of tightening of its monetary policy and raise interest rates by 50 basis points in December.

Having said that, recent hawkish signals from several Fed officials suggest the US central bank is still some way from pausing its rate hike cycle. Additionally, a modest pickup in US Treasury yields provides some support for the dollar and helps cap the NZD/USD pair. Traders also seem reluctant, preferring to wait for further catalyst from the release of the November FOMC meeting minutes, which will be released later in the American session.

Market participants will be looking for new clues on the outlook for Fed policy and future rate hikes. This will influence near-term dollar price dynamics and provide further directional momentum to the NZD/USD pair. Meanwhile, the US economic calendar, with the release of durable goods orders and the usual initial weekly jobless claims, could help traders take advantage of some near-term opportunities.

NZD/USD technical levels