The NZD/USD pair rose following the RBNZ interest rate decision.
The bank left the interest rate and the program to buy large assets unchanged.
The members also voted to reduce the cost of borrowing by providing more funds to the banks.
The NZD/USD pair rose to its highest level since March 2019, when traders responded to the interest rate decision by the Reserve Bank of New Zealand (RBNZ). It is trading at 0.6900, which is also an important psychological level.
NZD/USD rises after RBNZ decision
RBNZ interest rate decision
The RBNZ began its two-day monetary policy yesterday and today announced its results. As expected, the bank left the interest rate unchanged at 0.25%, in accordance with the guidelines published in March.
The bank also decided to continue its large-scale asset purchase program (LSAP) with a cap of n$100 billion. Most analysts expected the bank to follow in the footsteps of the Bank of England (BOE) and boost purchases. The program will expire in June 2022.
In addition, the bank decided to stimulate the economy more by providing cheap financing to the country’s banks with the aim of reducing the cost of credit. This financing will take the form of a new Funding for Lending program, which will start in December of this year. These loans will have a term of three years and will be offered against high-quality collateral. By providing low-cost loans, the bank will create incentives for business owners to borrow and stimulate their business.
The bank has also created an indirect incentive by delaying the start of the capital buffers for banks for another 12 months. According to the bank, this measure will give banks more leeway to support the economy.
Most importantly, however, the bank continued to implement negative interest rates, with some analysts expecting a 50 basis point cut next year. Others believe that this will not be necessary as the economy is recovering faster than expected. This is evidenced by the recent increase in house prices, better economic data and the potential vaccine against Covid.
NZD/USD technical outlook
Technical Table NZD/USD
The daily chart shows that the NZD/USD price is in a strong upward trend since its low of 0.5468 in March of this year. The pair has gained more than 26% during this period. Today, it moved above the previous double high of 0.6800 and reached the psychological level of 0.6900. It also moved above the 50-day and 25-day moving average.
Most importantly, the price is above the rising green trendline that connects the lows of June, October and November. This indicates that the bulls are in control, meaning that the uptrend will continue. In this case, the next target for the NZD/USD will be the psychological level at 0.7000. Find a good quality Forex broker by reading our detailed broker reviews….