NZD/USD slumps towards 0.6900 on RBNZ’s 0.25% rate hike, Governor Orr’s speech eyed

• NZD/USD fails to justify Tuesday’s bullish Doji, RBNZ rate hike.
• RBNZ matches market forecast of 0.25% increase in benchmark rate.
• New Zealand’s Hipkins announces travel guide for overseas visitors.
• Treasury Yields eye yearly top but DXY struggles around 16-month high ahead of US top-tier data/events.

NZD/USD remains pressured around 0.6930, following a quick drop to 0.6916 on the Reserve Bank of New Zealand (RBNZ) interest rate decision during early Wednesday.

The kiwi pair’s initial fall could be linked to the New Zealand’s central bank’s failures to surprise markets while announcing a widely anticipated 25 basis points (bps) of a rate hike, second in the line. RBNZ also said, “Conditional on the economy evolving as expected, the OCR would likely need to be raised above its neutral rate.”

Read: Breaking: RBNZ hikes as expected by 25bps, NZD/USD undecided

Earlier in Asia, the US Dollar Index (DXY) pullback from the 16-month top and the rate hike hopes kept NZD/USD buyers hopeful. The DXY bulls took a breather on mixed US activity data, following a strong push to the yields and US Dollar Index (DXY) after US President Joe Biden nominated Jerome Powell for Federal Reserve (Fed) Chairman and Richard Clarida for Vice-Chair’s post.

In addition to the sluggish moves of the DXY, optimism over New Zealand’s covid battle also helped the NZD/USD buyers before the RBNZ decision. “Beginning April 30th, fully vaccinated overseas visitors will be able to travel to New Zealand in stages,” the country’s COVID-19 Response Minister Chris Hipkins said in a news conference in Wellington on Wednesday. 

Having witnessed an initial market reaction to the RBNZ action, NZD/USD traders will pay close attention to the speech from RBNZ Governor Adrian Orr, scheduled for release around 02:00 AM GMT, for fresh impulse. Should the policymaker hold a hawkish view of the economy and signal the readiness to accept more rate hikes, the Kiwi pair may have further upside to go.

In addition to RBNZ’s Orr, multiple top-tier US data will also be important for the near-term direction of the Kiwi pair. Key among them are, October Durable Goods Orders, the second estimate of the Q3 Gross Domestic Product, the latest FOMC Meeting Minutes and October core PCE inflation are crucial.

Technical analysis

NZD/USD pair’s bounce off 13-week-old support line, at 0.6930 by the press time, portrayed a bullish Doji candlestick on the daily chart, suggesting further run-up to cross the key resistance, namely 61.8% Fibonacci retracement (Fibo.) of August-October upside, around 0.6960. However, a daily closing below the stated support line figure of 0.6930 will have another chance to recall the pair buyers, around 78.6% Fibonacci retracement level of 0.6890.