The RBNZ cap rate unchanged today for the 2nd consecutive meeting.
A summary of the decision:
The committee has observed that the prevailing interest rate level is curbing spending, subsequently reducing inflationary pressures, as was both expected and necessary. The Official Cash Rate (OCR) is anticipated to remain at these restrictive levels for the foreseeable future. This decision aligns with the trajectory of the New Zealand economy, which is progressing as previously predicted.
While there has been a decline in headline inflation and its expectations, the metrics for core inflation remain elevated. There exists a near-term apprehension that both economic activity and inflation might not decelerate as swiftly as projected. However, the committee is optimistic. By upholding these restrictive interest rates, they believe consumer price inflation will eventually align with its target range of 1 to 3% annually.
The Reserve Bank of New Zealand’s Governor Orr has emphasized that the recent uptick in the OCR track shouldn’t be interpreted as forward guidance or a definitive indication of the bank’s subsequent moves. He conveyed a sense of caution regarding rate adjustments and acknowledged the decline in inflation, though he still deems it too high. In the upcoming months, there’s a potential that economic activity might outpace expectations. The bank, however, is geared up to navigate through potentially volatile data in the near term. The possibility of a rate cut was scarcely discussed, leading to a unanimous agreement on the decision to retain the current rate. Conclusively, the bank is satisfied with the present cash rate and foresees a steady economic transition.
Technically, the price of the NZDUSD rebounded after the decision, but looking at the hourly chart below, the price rise stalled against its falling 100-hour moving average (currently at 0.59852 – blue line in the chart below) the inability to move above that level keeps the sellers in firm control the price law extended to 0.5930. There is retracement support near the 0.5903 level. That would be the next key target on further downside momentum.
Overall,if the price cannot get and stay above the 100-hour moving average, the sellers are in firm control. If the price can extend above that level we could see another retest of its 200-hour moving average currently at 0.6031.
Last week, the price briefly moved above that moving average level but quickly reversed back to the downside.
This article was written by Greg Michalowski at www.forexlive.com. Source