NZD/USD Stabilizes After Rate Decision

New Zealand’s central bank left the interest rate unchanged at 3% as expected. After the kiwi was falling, it managed to stabilize. Update.

The RBNZ, led by Alan Bollard, decided to leave the Official Cash Rate at 3%. This followed two consecutive rate hikes. Alan Bollard warned that this tightening cycle would be easier than the previous one – meaning that rate hikes would stop very short of the 8.25% rate they reached before the financial crisis – a rarity in the Western world.

The RBNZ added a dovish statement, saying it will ease on more tightening. Nevertheless, the statement could be worse – showing more concern about the economy, so NZD/USD stabilized.

NZD/USD now trades at 0.7466. Earlier in the day, it fell to 0.74. This support line, mentioned in the NZD/USD outlook, worked well – it worked as a strong line of resistance in July, and it took NZD/USD quite some time before rising again. The kiwi is now bound between 0.74 and 0.7523, which was a swing high back in November 2009. Below, 0.7355, 0.73 and 0.7210 stand. Above, 0.76 is a significant line above 0.7523.

At 3%, the rate is lower than its neighbor Australia, but still much higher than the American, Japanese, British, European and even the Canadian rate, which got three hikes.

For kiwi traders, it’s important to watch the 0.74 level. A break lower will trigger serious falls.

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free..