The RBNZ statement triggered a break higher from a range that had been playing out in NZD/USD since late yesterday. The pair broke above range resistance around 0.7338 but gains have been marginal thus far and the RBNZ press conference, scheduled at 18:00 EST will ultimately drive the currency pair.
NZD/USD found support on Wednesday at 0.7311 and held above the level throughout the day which led to a doji print on a daily chart to snap a prior three-day losing streak.
The RBNZ kept rates unchanged at 1.75% which was largely expected. The central bank indicated that monetary policy will continue to remain accommodative “for a considerable period” which is in line with prior communication.
The RBNZ observed that the trade-weighted exchange rate had increased since the last meeting in May and stated that a lower New Zealand dollar is needed. NZD/USD traded near lows for the year thus far at the time of the last RBNZ meeting and the rally to a high in late July measures a gain of over 10%. At the current exchange rate, the pair is up over 7% from the May lows.
The housing market appears to be less of a concern for the Bank although it noted that a resurgence in house prices cannot be ruled out. Policymakers also noted that GDP growth in the March quarter fell short of expectations but moving forward, an improvement is expected.
There is some expectation for headline inflation to drop in the coming quarters as the impact of fuel and food prices dissipate but inflation is expected to hold at 2% targets in the longer term.
Resistance in NZD/USD is found at 0.7375 which marks a spike high posted in February. The level is near the upper line of a declining trend channel that has encompassed price action since July 31st which makes it an important level for a directional bias. Some support can be seen near 0.7338 as the level held the pair lower since yesterday, stronger support remains at 0.73115.