The New Zealand Dollar (NZD) rose broadly on Thursday against the US Dollar (USD) after the Reserve Bank of New Zealand (RBNZ) decision to increase the interest rate by 0.25% to 3.0%, for the second time in a row. Moreover, the monetary policy statement was also pretty hawkish, hinting at further hike in the cash rate during forthcoming months.
Technical Analysis
As of this writing, NZD/USD is being traded at 0.8614. A hurdle may be noted near 0.8629, the 50% fib level of the recent rally, ahead of 0.8745, the swing high of the previous wave as demonstrated in the following chart. A break above 0.8745 will be seen as a confirmation signal for Bullish trend in the long run due to Higher High (HH) on the daily chart.
On the downside, the pair is likely to find a support near the 0.8600 handle which is the psychological level as well as 61.8% fib level. The market sentiment is bullish and will remain bullish as far as the 0.8514 support area remains intact.
RBNZ Monetary Policy
RBNZ increased the overnight lending rate as per the market expectations. The bank expressed no concerns over the pace of the growth or current inflation levels which was seen as hawkish by the investors. The NZD/USD found great buying interest after the announcement of monetary policy and the pair is expected to print a Higher High (HH) above the 0.8745 resistance area.
Trade Idea
Buying the pair around the current levels could be a good strategy; the stop should be placed at the low of yesterday while the target may be near 0.8745-60. The pair is expected to hit the 0.8745 level during the early half of the next week.
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