RBNZ unexpectedly holds rates steady, sending New Zealand Dollar tumbling

• The RBNZ’s decision to keep policy rates unchanged leaves the New Zealand Dollar trailing its peers.
• Expectations had been for a 25 bps increase in the OCR to 3%.
• An unchanged interest rate decision from the Fed is expected by investors.

A 1.28% fall against the US Dollar (USD) takes the New Zealand Dollar (NZD) to around 0.5600 on Wednesday, as the kiwi trades markedly weaker against its major currency peers.

At its policy meeting, the Reserve Bank of New Zealand (RBNZ) surprised markets by holding the Official Cash Rate (OCR) at 2.75%. Widespread expectations had pointed to a 25 basis points (bps) increase to 3%.

Despite the hold, RBNZ Governor Anna Breman has left further tightening on the table, signalling more than had previously been expected.

In its monetary policy statement, the RBNZ said: “More OCR hikes probable, but dependent on economic outlook”. Reuters also quoted RBNZ Governor Breman as saying: “They may even be higher than we said at the September meeting”.

Ahead of the Federal Reserve’s (Fed) monetary policy announcement, the US Dollar is on course for a fourth consecutive trading day of gains on Wednesday. At the time of writing, the US Dollar Index (DXY), which measures the Greenback against six major currencies, is edging higher to around 101.43.

With the Fed widely expected to keep interest rates within the 3.75%-4.00% range, the central bank’s communication remains a key influence on the US Dollar’s outlook.

Little change in formal communication is expected by economists at Deutsche Bank, who see the forthcoming Fed decision as largely uneventful. They note that “the statement itself [is] to contain only limited changes, although dissents to a hold are possible.” For the economists, “the interest will therefore be in Chair Warsh’s press conference and how the Fed balances still-elevated inflation and solid growth against the recent tightening in financial conditions,” as markets are likely to examine his comments closely for any change in the policy narrative.

NZD/USD Retains a Bearish Technical Bias Below the 20-Day EMA

Trading at 0.5614 on the daily chart, NZD/USD retains a bearish near-term bias below its 20-day Exponential Moving Average (EMA) of 0.5663. Recent attempts to hold above this moving average have failed, leaving the pair under pressure. Although the Relative Strength Index (RSI), at 39, is recovering from oversold territory, it continues to favour the downside. This suggests that rebounds may still attract sellers below the 0.57 area.

The 20-day EMA, around 0.5663, provides the first resistance on the upside. A daily close above it would relieve immediate selling pressure and pave the way towards last week’s highs. Below the market, recent lows offer a tentative floor, as the current dataset identifies no nearby technical support levels. A decisive break below 0.56 would therefore be likely to leave the pair vulnerable to further losses within the broader downtrend.

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