May 26, 2021 13:44:50

The RBNZ meeting overnight provided us with a hawkish surprise, as we hinted at yesterday. New forecasts show a rate hike is being signalled in the second half of next year, though Governor Orr stressed these are highly conditional on the economy developing as expected.

The market has now put the RBNZ firmly in the hawkish central bank camp, similar to Canada and Norway, pushing the kiwi 1.1% higher versus the dollar to levels last seen in February. While that pair battles with the early January high, the hawkish bias should provide the kiwi with decent support going forward.

NZD/JPY long-term bullish trend

NZD/JPY has hit levels last touched in February 2018 today after pausing above 79.00 over the last few weeks. This resistance zone also proved tough to break in February and March earlier this year (being previous peaks in 2018) but a strong close on the week will certainly attract more buyers. They will look to push for the next target at the retrace level around 80.84 and then the January 2018 highs at 81.56. Above here are the previous peaks in January and July 2017 around 83.80/91. If bulls can’t consolidate above 79.43, we go back into the range with support at the 50-day SMA at 77.90.

NZD/CHF top of the descending channel

Another kiwi pair with a low-yielding currency, NZD/CHF has pushed up to the top of the bearish channel formed since the start of March. The cross made new cycle lows on Monday but the hawkish RBNZ projections have seen prices move north above the 100-day SMA. The 50-day SMA is proving more difficult to get past so a strong close is needed to encourage the bulls to break out of the channel. The weekly and monthly chart show a potential bullish flag formation which would target the late February high at 0.6767 at a minimum if it plays out. Place stops below this week’s lows at 0.6428.