NZD/JPY nosedives 100 pips as RBNZ keeps Cash Rate Peak unchanged, unveils 0.25% rate lift

• NZD/JPY slumps to the lowest level in a week, extends previous pullback from yearly high.
• RBNZ announces 0.25% OCR hike, keeps peak rate forecasts unchanged.
• Retreat in yields, upbeat concerns about Japan manufacturers also weigh on prices.
• Risk catalysts are the key, RBNZ’s Orr eyed for immediate directions.

NZD/JPY stands on slippery grounds as it takes offers around 81.50, down more than 100 pips on a day, as the Reserve Bank of New Zealand (RBNZ) fails to offer hawkish surprise to the markets on early Wednesday.

RBNZ announces 0.25% increase to its Official Cash Rate (OCR), as expected, during May month monetary policy meeting. It’s worth noting that the RBNZ defends its cash rate peak at 5.5% and exert downside pressure on the NZD/USD prices.

Also read: Breaking: RBNZ hikes rates by 25 bps to 5.50% in May, widely expected

Apart from the RBNZ moves, the retreat in the US Treasury bond yields and recently upbeat concerns about Japan also weigh on the exotic pair.

That said, the US 10-year and two-year Treasury bond yields retreated from the highest levels since early March the previous day. On the other hand, “Business sentiment at big Japanese manufacturers turned positive for the first time this year and service-sector morale hit a five-month high, providing more evidence of an economy on the mend after a COVID-led recession,” per the monthly results of the Reuters Tankan survey.

Moving on, challenges to sentiment and the bond market moves can entertain the NZD/JPY pair traders while a press conference by RBNZ Governor Adrian Orr could offer immediate directions to the cross-currency pair. Should the policymaker manages to defend the hawkish bias, the New Zealand Dollar (NZD) may witness a corrective bounce.

Technical analysis

Despite the latest retreat, a one-month-old ascending support line, near 85.15 by the press time, challenges the NZD/JPY bears dominance.