The RBNZ hiked its OCR by 50 bps earlier in the day, bringing that to 1.50% in a supposedly more hawkish move. But yet, the kiwi has fallen down by 0.9% now against the dollar to below 0.6800 after an initial jump to 0.6900. What gives?
Let's take stock of the situation.
For one, local analysts are saying that this is more of a 'dovish hike' despite the RBNZ promising a more aggressive policy path. In essence, the argument is that they are frontloading the rate hikes and not really seeing anything more beyond what is the supposed terminal rate. The OCR outlook hasn't really changed since February and that is one of the key arguments.
In terms of technical action, NZD/USD jumped up to near a test of its 200-day moving average (blue line) close to 0.6900 but that capped the upside push before a drop all the way back down now. The pair is coming close to a test of the 100-day moving average (red line) instead at 0.6783. That alongside the 50.0 retracement level at 0.6782 will be a key support level to watch for the kiwi.
If anything else here, this could be a lesson to learn for markets when viewing the Fed. We've priced in a whole bunch of rate hikes and a rather aggressive Fed already that if there isn't any change to where the Fed sees 'neutral', that could spell trouble for the US dollar once we get to judgment day where we may see a case of buying the rumour, selling the fact.
It very much appears to be the case for the kiwi at the moment at least.
