NZD/USD falls to three-week lows around 0.6165/70 after RBNZ decision

• NZD/USD falls almost 80 points as RBNZ matches rate hike expectations.
• The RBNZ meets market expectations of announcing a 0.25% rate hike.
• Dollar retreat and Treasury yields put a floor under Kiwi prices.
• The RBNZ Governor’s Speech, US Debt Ceiling Negotiations and Fed Minutes will be in the spotlight for NZD/USD traders.

NZD/USD has fallen nearly 80 points to 0.6169 on the expected 25 basis point (bp) rate hike announced by the Reserve Bank of New Zealand (RBNZ) early on Wednesday. The pair thus falls to its lowest level in three weeks, specifically since May 2.

He RBNZ has announced a 0.25% increase in its Official Cash Rate (OCR), as expected, during the monetary policy meeting in May. The entity places its interest rate at 5.5% and exerts downward pressure on the prices of the NZD/USD. In his statement, the Committee is confident that with interest rates remaining at a restrictive level for some time, consumer price inflation will return to its target range of 1-3% per yearwhile supporting maximum sustainable employment.

Earlier in the day, New Zealand Q1 retail sales marked a contraction of 1.4% q/q vs -0.4% expected and -0.6% prior, while yoy figures fell to -4.1% vs -4.0% former.

The recoil of Dollar Index (DXY) it dwarfed the pessimism generated by the NZD/USD data earlier in the day. The greenback is now moving around 103.50 after reaching 103.64 yesterday, a new two-month high.

Tracing the reasons for the dollar’s latest pullback, the lack of progress in talks to avoid the expiration of the US debt ceiling and fears that the US could mark a “catastrophic” default hog the news. attention. Furthermore, the latest pullback in US Treasury yields also challenges the Dollar ahead of the Fed Minutes.

The S&P 500 futureswhich reflect the mood of the market, ignored bearish Wall Street results and posted modest gains, while yields on 10-year and 2-year US Treasuries retreated from the highs reached in early March.

Having witnessed the initial market reaction to the RBNZ interest rate decision, NZD/USD traders will be watching the RBNZ Governor Adrian Orr press conference. Should the policymaker succeed in defending the hawkish bias, the Kiwi pair could continue to rise, especially amid the recent pullback in the US dollar.

In what follows, particular attention will be paid to the US debt ceiling talks and the minutes of the latest Federal Open Market Committee (FOMC) monetary policy meeting for clear guidance. If US policymakers manage to overcome default fears, as well as if the Fed Minutes appear hawkish, the US dollar could regain its charm and put downward pressure on the NZD/USD.

NZD/USD Technical Analysis

A daily close below a 1-month rising support line around 0.6225 at time of writing is necessary for NZD/USD bears to regain control. Until then, hopes of witnessing another battle with the key resistance line that runs from early February near 0.6385 at the latest cannot be ruled out.