The New Zealand dollar has been lifted on the foreign exchange market against the US dollar after the RBZD delivered its sixth straight interest rate hike during the fourth policy meeting of 2022.
The Reserve Bank of New Zealand delivered its third consecutive half a percentage point rate rises on Wednesday in a move that was widely expected by financial markets and economists.
Notably the RBNZ increased the cash rate to 2.5 per cent, lifting the benchmark rate above the 2 per cent level which it deems to be neutral, or the point at which monetary policy is neither restrictive nor accommodative.
Since starting its tightening cycle in October, it has now lifted rates by 2.25 percentage points. Markets are pricing in yet more hikes if the reaction in the kiwi is anything to go by.
According to the ActivTrader market sentiment tool some 67 percent of traders are bullish towards the NZDUSD pair. As we typically look to fade sentiment biases, this could mean the NZDUSD pair could start to reverse lower.
It is worth mentioning that high levels of bullish sentiment suggest a classic contrarian sentiment trade is still in the making, so do be careful buying this pair at current level, especially since the recent rejection from the 0.6200 area.
NZDUSD Short-Term Technical Analysis
The four-hour time frame shows that a large head and shoulders price pattern has formed. Typically this is not a good sign for bulls, as these are strong bearish reversal patterns.
If the pattern is correct then a decline back to the 0.5800 region seems plausible. If a recovery takes hold, then a rally towards the 0.6300 resistance level is more likely in the medium-term.
NZDUSD Medium-Term Technical Analysis
The daily time frame shows that the pair is falling well under the neckline of large falling price channel type pattern. These types of patterns are typically considered to be classic bullish reversal pattern, however, it is failing now.
According to technical analysis we could see more downside likely than while the NZDUSD pair trades under the 0.6000 level. Selling a restest of the 0.6500 level area appears another solid strategy for the bears.