NZD/USD PRICE ANALYSIS: EYES 0.6350 AS RBNZ-FED POLICY DIVERGENCE EXPANDS

The NZD/USD pair is aiming to recapture the critical resistance of 0.6350 as the surprise interest rate decision of 50 basis points (bps) hike by the Reserve Bank of New Zealand (RBNZ) to 5.25% has expanded the RBNZ-Federal Reserve (Fed) policy divergence.

RBNZ Governor Adrian Orr hiked its Official Cash Rate (OCR) by 50 bps on Wednesday while the street was estimating a rate hike of 25 bps. The RBNZ went for a bumper rate hike despite signs of contraction. New Zealand’s inflation rate is not softening in the past three months, therefore, big rate hikes were needed to tame price pressures dramatically.

Meanwhile, S&P500 futures have added losses further after a two-day losing streak, portraying a further decline in the risk appetite of the market participants. The US Dollar Index (DXY) has sensed a pause while attempting to surpass the critical resistance of 102.00. Going forward, the USD Index will dance to the tunes of the United States Nonfarm Payrolls (NFP) data, which will release on Friday.

On a two-hour scale, NZD/USD is auctioning in a Rising Channel chart pattern in which each corrective move is considered a buying opportunity for the market participants. The Kiwi asset attempted a breakout of the aforementioned chart pattern on Wednesday but failed to keep the strength amid the presence of responsive sellers.

The 20-period Exponential Moving Average (EMA) at 0.6312 is providing support to the New Zealand Dollar.

Meanwhile, the Relative Strength Index (RSI) (14) has slipped into the 40.00-60.00 range after exhaustion in the upside momentum.

A decisive break above February 07 high at 0.6363 will expose the Kiwi asset to the round-level resistance at 0.6400 followed by December 05 high at 0.6443.

On the flip side, a breakdown of March 21 low at 0.6167 will drag the asset toward March 15 low at 0.6139. A slippage below the latter will expose the asset for more downside toward the round-level support at 0.6100.