NZD/USD portrays pre-RBNZ caution around 0.6150, FOMC Minutes eyed as well

• NZD/USD seesaws inside a one-week-old trading range ahead of the key event.
• Recently increasing odds of the RBNZ’s 75 bps rate hike, risk-on mood keeps buyers hopeful.
• OCR peak, Governor Orr’s press conference will be crucial, US PMIs, Fed Minutes will entertain the traders afterward.

NZD/USD treads water around the mid-0.6100s amid the final nail-biting hours to the key Reserve Bank of New Zealand (RBNZ) Interest Rate Decision on Wednesday. The Kiwi pair gained the previous day as firmer sentiment joined hopes of 75 basis points (bps) of a rate increase by New Zealand’s central bank.

Stocks in Europe and the UK, as well as Wall Street, closed positively whereas the US 10-year Treasury yields dropped six basis points (bps) to 3.76%. At home, NZX 50 remained dicey as traders feared higher rates, as well as take negative notes from China’s Covid conditions.

That said, Fed policymakers’ failure to defend the previous hawkish expectations and mildly positive data also appeared to have favored NZD/USD buyers the previous day. It should be noted that the Kiwi pair ignored downbeat New Zealand trade numbers for October to print the gains.

Richmond Fed Manufacturing Index improved to -9 for November versus -10 prior while Kansas City Federal Reserve President Esther George recently said, “(We) could well take a higher interest rate for some time to convince households to hold on to savings.”

On the other hand, New Zealand Trade Balance flashed -2,129M MoM figures for October versus $-1,353M market forecasts and $-1,696M prior. Further, the Exports increased to $6.14B versus $5.94B prior whereas the Imports rose to $8.27B versus $7.63B prior.

Looking forward, the market’s high hopes of witnessing a 0.75% rate increase challenge the NZD/USD buyers as the Fed hawks appear to run out of steam. Even so, the latest inflation-linked data from Auckland have been positive and hence the hopes of witnessing a strong rate lift are high and can keep the bulls hopeful.

In addition to RBNZ’s verdict on the rates, forecasts concerning the Official Cash Rate (OCR) peak will be important as well.

Following that, the preliminary readings of November’s monthly activity data and Minutes of the Fed’s latest minutes will be closely observed to confirm the chatters surrounding the economic transition and the 50 bps rate hike chatters from the Fed.

Also read: RBNZ Interest Rate Decision Preview: NZD/USD – Buy the rumor, sell the fact on a 75 bps hike

Technical analysis

A clear break of the recent trading range between 0.6060 and 0.6200 appears necessary for clear directions. That said, a convergence of the 200-EMA and ascending trend line from October 13, around 0.5940, appears an additional important support to watch during the quote’s surprise downside.