Author: Mr. Amar – Technical Analyst

The Reserve Bank of New Zealand (RBNZ) has raised the Official Cash Rate by 50 basis points to 2% and markets are now watching the pace of future tightening, which the Monetary Policy Statement (MPS) may shed some light on. NZD/USD surges over 60 pips as the RBNZ announces a 50-basis point (bps) rate hike earlier today. With that, the pair not only recouped the losses of the first few days, but also reached a three-week high marked on Monday.

Of note, risk appetite is fading as negative headlines from China and South Korea add to cautious sentiment ahead of key data. However, North Korea’s three missile launches and Japan’s dislike for them are adding to the market’s concerns ahead of today’s Fed minutes and also appear to be weighing on market optimism. Along the same lines could be news updating China’s Covid lockdowns and their negative impact on the world’s second largest economy.

Having witnessed the initial reaction to RBNZ moves, NZD/USD traders will await RBNZ Governor Adrian Orr’s press conference for further impetus. Should the policymaker hint at more rate hikes, even by a larger scale, the kiwi pair could add some gains. Next, US durable goods orders for April. NZD/USD needs to challenge the pin bar with a clear up break from 0.6490 on Tuesday to nullify any chances favouring a pullback towards the 0.6394 support. However, any other downside makes the kiwi pair vulnerable to test the 0.6300 line.