NZD/USD Rises on Rate Hike and Future Hikes
Posted on June 10, 2010 by Yohay
Filed Under Forex News | 6 Comments
New Zealand’s RBNZ was the third central bank to raise the rates. This is only the beginning, with more hikes expected. NZD/USD likes it. Update on this currency.
Alan Bollard, governor of the Royal Bank of New Zealand, didn’t disappoint traders, as he followed Australia and Canada. The Official Cash Rate in New Zealand is now 2.75%, up from 2.50%. This raise will soon be translated into floating mortgage rates, cooling the real estate market and taming inflation. This is only the first step:
Bollard already said that this tightening cycle won’t be at the same extent as the previous one. This means that an OCR of 8.25% is very unlikely, but there’s a lot in the middle. ASB economist Jane Turner said that while the European problems stay on the radar of the bank, we will probably see a hike of 0.25% in every upcoming meeting, until it hits 5%.
New Zealand enjoys a nice annual growth rate of 3.5%, and good trade with China. The strong winds in Europe are very far from this small distant country.
NZD/USD reacted with a rise – it jumped from 0.6660 to 0.6740 (at the time of writing) – this 80 pip jump is abnormal for this pair. It’s still far from the strong resistance line of 0.6850. If it does break higher, the next line of resistance is at 0.70 – a round number.
On the other hand, this move was expected, and the initial rise could be followed by another dip. NZD/USD already reached 0.6570 this week, almost matching last week’s low, and creating a double bottom. A break below this line would send the pair towards support at 0.64, but this doesn’t look likely at the moment.
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