The NZD/USD exchange rate continued rising as the US Dollar Index (DXY) rebounded and after the Reserve Bank of New Zealand (RBNZ) delivered a hawkish interest rate cut. It jumped to a high of 0.5715, its highest level since November 3, up by 2.45% from its lowest level this year.
RBNZ and Federal Reserve Interest Rates
The NZD/USD exchange rate rose after the Reserve Bank of New Zealand delivered its interest rate decision, which was in line with what most analysts were expecting.
The bank continued its interest rate cutting cycle as it moved the official cash rate down by 25 basis points to 2.25%. It has moved them from the year-to-date high of 3.75%, a move aimed at supporting the economy, which has recovered at a slower rate than expected.
However, this interest rate cut was accompanied by a forecast that showed no more rate cut in the near term. Indeed, unless in the past, one committee member voted for holding rates steady.
Meanwhile, analysts believe that the Federal Reserve will cut interest rates in the next meeting, and then continue the process in 2026 when Donald Trump replaces Jerome Powell, possibly with Kevin Hassett.
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Odds of a Federal Reserve interest rate cut rose to 83% on most betting platforms. These odds rose after multiple reports showed that the US economy was slowing. For example, a report released this week showed that consumer confidence tumbled in November, while another one revealed that the retail sales softened before the government shutdown.
The NZD/USD exchange rate will likely be more muted for the rest of the week as US markets will be closed on Thursday for the Thanksgiving holiday.
NZD/USD Technical Analysis
The daily timeframe chart shows that the NZD/USD exchange rate has been in a strong downward trend in the past few months, moving from the year-to-date high of 0.6116 in July to a low of 0.5580 this month.
This decline happened even as the US Dollar Index retreated across the board. It has formed a descending channel and remained below the 50-day and 100-day Exponential Moving Averages (EMA).
The pair has now retested the upper side of the channel after the RBNZ interest rate decision. Therefore, the most likely scenario is where it resumes the downtrend trend as sellers target the next lower side of the channel at 0.5585. A move above the upper side of the channel will invalidate the bearish outlook.
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