Hawkish RBNZ outlook supports further New Zealand Dollar recovery to near 0.5650

• NZD/USD extends recovery towards 0.5650 as markets expect further RBNZ tightening.
• Wednesday’s unchanged RBNZ rate decision represented a temporary pause, according to OCBC.
• The US Dollar weakens as US mid-term elections approach.

Despite the Reserve Bank of New Zealand (RBNZ) keeping its Official Cash Rate (OCR) at 2.75% on Wednesday, financial markets expect monetary tightening to continue. Those expectations are supporting the New Zealand Dollar (NZD), which extends Thursday’s rebound towards 0.5650 against the US Dollar (USD) during Friday’s European session.

Markets had anticipated a 25 basis points (bps) increase in the RBNZ’s OCR to 3%. The decision to leave the rate unchanged instead put considerable pressure on the New Zealand currency.

Kiwi stabilises as temporary RBNZ pause limits downside near 0.5600

The Reserve Bank of New Zealand’s vote to leave the OCR unchanged was split, OCBC analysts point out. They note that “Governor Anna Breman” joined the majority in favour of holding rates, whereas “Chief Economist Paul Conway backed a hike.” According to the analysts, most committee members “preferred to give the July and September rate increases more time to work through the economy, particularly with domestic demand still subdued.”

Rather than signalling a change in policy direction, OCBC says the decision should be regarded as “more of a pause than a dovish pivot.” The bank notes that “the RBNZ said tighter monetary policy is likely to be required, although the timing remains data-dependent,” adding that “attention now shifts to December.” Its policy forecast is unchanged: “we continue to expect two further hikes, in December and 1Q27, which should limit further NZD downside.” Turning to the exchange rate, OCBC says that “for NZD/USD, 0.5600 remains the key near-term level to watch after being tested around the decision.”

Heading into the weekend, the US Dollar is also facing selling pressure. News surrounding the mid-term elections due on Tuesday will be a significant influence in the period ahead.

Safe-haven flows have accompanied renewed weakness in technology shares, according to ING analysts, who say that “fresh pressure on tech stocks has triggered some safe-haven buying in US Treasuries and weighed on the Dollar as the front end followed lower.” Although “moves are contained in both equities and FX,” they describe the episode as “a reminder that the greenback still faces downside risks from oscillating AI sentiment.”

Outside periods dominated by technology-sector news, however, ING observes that “whenever tech stocks don’t dominate headlines, the Dollar has had no trouble attracting buyers,” and says its analysts “don’t think Wednesday’s FOMC changed that.” On the economic backdrop, the bank notes that “yesterday’s US data was hawkish-leaning, with 3Q growth slightly above consensus at 3.4% and core PCE at 0.3% month-on-month in September – enough to keep the Federal Reserve on high alert.”

For the session ahead, ING believes that “the main risk for the Dollar today is some precautionary unwinding of net-long positions ahead of Tuesday’s US midterm elections.” The analysts add that “a Democratic sweep is trading around 68% in prediction markets, and that could be seen as slightly negative for the US Dollar from a few angles, from higher risk of government shutdown and gridlock on debt ceiling negotiations to potential damage to already shaky AI-related sentiment.” Their conclusion is measured: “We’d be cautious in chasing the USD upside in the next few days.”

NZD/USD Remains Under Pressure Below the 20-Day EMA

Trading at 0.5644 on the daily chart, NZD/USD retains a bearish short-term outlook while it remains below the 20-day exponential moving average (EMA) at 0.5659. The recent recovery has failed to gain lasting traction beneath this short-term trend indicator. With the Relative Strength Index (RSI) near 45, momentum is moderate and lacks conviction, offering little counterweight to the prevailing downward bias.

The 20-day EMA at 0.5659 provides the immediate resistance level. Buyers would first need to regain this threshold to relieve bearish pressure and allow a more durable recovery. Below it, the balance of risks remains tilted towards further consolidation or an extension of losses, while intraday advances are likely to encounter selling near the moving average.

(The technical analysis of this story was written with the help of an AI tool. Know more.)