NZDUSD Rate Breaks Out of Monthly Opening Range Following RBNZ

NZDUSD stands at risk for a larger correction following the Reserve Bank of New Zealand (RBNZ) meeting as the central bank appears to be in no rush to implement lower interest rates.

NZDUSD Rate Breaks Out of Monthly Opening Range Following RBNZ

The reaction to the RBNZ meeting keeps the topside targets on the radar as NZDUSD clears the monthly opening range, and it seems as though the central bank will stick to the sidelines at the next rate decision on August 7 as the committee notes that “domestic GDP growth had held up more than projected in the March 2019 quarter.”

In turn, NZDUSD may continue to retrace the decline from earlier this year as the RBNZ reverts back to a wait-and-see approach, but Governor Adrian Orr and Co. appear to be on track to further insulate the economy as “members agreed that more support from monetary policy was likely to be necessary.”

It seems as though the RBNZ will retain a dovish forward guidance as “the Committee agreed that the risks to achieving its consumer price inflation and maximum sustainable employment objectives are tilted to the downside,” with the New Zealand Dollar at risk of facing headwinds over the coming months as officials insist that “a lower OCR may be needed over time.”

With that said, the broader outlook for NZDUSD remains tilted to the downside as both price and the Relative Strength Index (RSI) snap the upward trends carried over from 2018, but recent price action raises the risk for a larger correction as the exchange rate breaks out of the monthly opening range following the failed attempt to test the 2019-low (0.6482).

NZD/USD Rate Daily Chart

• NZDUSD may continue to retrace the decline from the April-high (0.6837) as the Fibonacci overlap around 0.6490 (50% expansion) to 0.6520 (100% expansion) offers support, with the exchange rate breaking out of the descending channel carried over from the same period.

• The break above the 0.6600 (23.6% retracement) to 0.6630 (78.6% expansion) area brings the 0.6710 (61.8% expansion) to 0.6740 (23.6% expansion) region on the radar, with the next area of interest coming in around 0.6780 (100% expansion) to 0.6790 (50% expansion).