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August 12, 2022

Buy Kiwi Now Before Rate Hike

Frank Cabibi

Next Tuesday, the RBNZ will announce their new official bank rate which is expected to be 3%, a 0.50% rise from July. This hike will make it the highest yielding major currency on the market. Here is why you should consider buying the kiwi before Tuesday's decision as well as some strong NZD long setups.

Preview of Policy Decisions

The Regional Bank of New Zealand has been very adamant about tackling inflammatory issues in their economy. So much so, that analysts have stated that rates will not only reach a certain level but stay there for an extended period of time.

It also appears that New Zealand's central bank is planning to stay the course with consistent 50 basis point runs in the future. GDP is still in decline, so the economy is experiencing contraction, but that does not seem to deter the RBNZ for now.

People do have more confidence in the bank's battle as surveys saw a decrease in inflation expectations from 3.29% to 3.07% in 2023.

Kiwi Outlook

Subduing inflation is a primary factor in the kiwi's strength. Commodity prices like gold, oil and agriculture have declined overall due to supply chain issues and geopolitical conflict. This has an affect on the economy, but it is secondary towards CPI.

Investors are now pricing in the kiwi's target as we come to an end of this trading week. Outlook is strong on this currency right now.

Kiwi Setups

NZD/CHF

kiwi

Kiwi-swiss jumped today on rate hike anticipation. Price formed a higher high on the 1D, but still needs to close above resistance to validate a breakout. Price has been on a relatively long downtrend since February of 2021. Because of this strong trend to the downside, it's hard to tell when sentiment will shift. But a break above resistance could take price higher towards 0.61700s.

NZD/CAD

kiwi

NZDCAD is coming up to test a previous top after breaking above a falling trend line on the 1D timeframe. More resistance lies above around the 61.8% fib retracement level and another longer term falling trend line.

EUR/NZD

kiwi

One of the hardest moves on the kiwi is EURNZD after price drops 0.79% already today. Price already broke under support and formed a lower low, but it still looks like there is room to run on the 1D timeframe. Strong downside momentum could take price all the way to test the lows around 1.56904.

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