Economists widely expect the Reserve Bank of New Zealand (RBNZ) to hike its overnight cash rate by 25 bps for a third consecutive time on Wednesday. Whether or not the central bank’s decision holds any surprises doesn’t detract from what ultimately could prove a positive technical setup for NZD/USD further down the line.
NZD/USD hit a high of 0.74607 in February of last year but failed to establish a fresh higher. Instead, the currency pair has been trapped in a range between 0.74607 and the previous swing low of 0.65095. Within that range, NZD/USD has formed a downward trend channel, which led price to test but fail a break close to the bottom of its this long-held range.
Both the failed test of the bottom of the range and the downward channel could portend a continuation of last year’s uptrend. Still, considering recent geopolitical tensions related to the Ukraine and NZD/USD’s sensitivity to “risk-on” and “risk-off” sentiment, NZD/USD trades are not for the faint of heart.
