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July 12, 2022

Should You Buy Kiwi Before Rate Decision?

Frank Cabibi

AUD and NZD is stronger today as the RBNZ rate decision is to come out later today at 10:00 p.m. EST. Let's see a forecast on the kiwi and how it fares compared to other currencies. Here are some reasons to be buy kiwi before then.

What To Expect

The kiwi hit a two-year low as the currency struggles with surging inflation and slower economic growth. This seems to be a common theme around the world as other major economies are going through the same contraction. However, we can look to interest rates.

Some countries are doing the same thing, but are not aggressive enough compared to economists. New Zealand's central bank is already the most combative against inflation with an interest rate of 2% already. Most major countries are struggling to bring it up any higher because of the economy.

buy kiwi
Kiwi cash rate

However, it seems that the RBNZ is taking up a similar philosophy to the Federal Reserve which is to fight inflation at all costs. This means that the kiwi's interest rate is going to continue to rise regardless of what happens to the economy in the short term. In other words, if unemployment rises, so be it.

RBNZ plans to hike up their interest by another 50 basis points with rumored talks of doing another one in August. Rates are at 2% now, expecting to be 2.50% later today, and 3% in August.

Setups to Buy Kiwi

NZD/CHF

buy kiwi

NZDCHF climbs on the day in anticipation of a 50 bp hike. Price has significant resistance around 0.61683 and a falling trend line right above it that could likely get tested soon. Traders might try to price the kiwi at a higher level, so that level of resistance could be a good price target.

NZD/JPY

buy kiwi

This pair looks promising to the upside as price touches a rising trend line on the 1D timeframe. This level is also paired with a zone of support where a double bottom has formed. Traders might be looking to ride this trade to the top of the wedge of even a potential breakout to further highs.

EUR/NZD

buy kiwi

EURNZD comes down to a previous bottom on the 1D timeframe. Price could see a bounce from this support, however, a break under this level would result in a pretty considerable drop in value. Price could go as far as the 1.56000s on an extreme move.

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