Limited Bounce for the Kiwi Dollar After the RBNZ

Although it’s somewhat unclear whether sentiment on the Kiwi dollar is recovering given that most currencies have gained against the US dollar in recent days, on the whole the double cut by the Reserve Bank of New Zealand (‘the RBNZ’) seems to be positive given some expectations for a triple cut. This article summarises recent news and data affecting the New Zealand dollar then looks briefly at the charts of NZDUSD and NZDJPY.

The governor of the RBNZ, Adrian Orr, hinted in comments after Wednesday’s cut that another double cut would be possible in February 2025. Given the context from growth in New Zealand, that would make sense:

New Zealand’s economy hasn’t been in recession since early 2023, but the rebound from that technical recession certainly hasn’t been strong. A weaker Chinese economy is an important factor because New Zealand depends quite heavily on exports to China.

Generally lukewarm job and spending data have also been in view, as has politics, with increasingly visible disagreements among the parties of the governing coalition. The decline by inflation has also been quite consistent over the last several months:

2.2% annual headline inflation in the third quarter was the lowest reading since the first quarter of 2021. Now that inflation is so close to the target of around 2% and with the overall economy near stagnation, the RBNZ seems to have more confidence in continuing its cycle of loosening which began in August.

Donald Trump’s election as American president is likely to have an ongoing strong but indirect effect on New Zealand’s economy. As a highly trade-sensitive nation, New Zealand’s economy would be challenged by proposed American tariffs on Chinese goods if they were implemented.

Broadly speaking, the RBNZ seems likely to follow a similar path to the major central banks, just maybe moving a bit faster given how high Kiwi rates reached last year. It’d be unlikely to see a big differential open up between the RBNZ and the Federal Reserve before summer 2025, but how fast the RBNZ cuts rates could be a critical factor for NZDJPY in the months ahead.

NZD/USD’s Bounce Might Have Potential

Recent American data generally in line with expectations supported the impression that the Fed will continue to cut gradually, while the RBNZ’s double rather than triple cut on Wednesday also gave some support recently to NZDUSD. The selection of Scott Bessent as incoming American Treasury Secretary has somewhat decreased the likelihood of immediate large tariffs.

The 20 SMA is an important dynamic resistance on the chart of NZDUSD and might push the price lower in the next few days, but a close above there could signal an ongoing bounce. There’s no clear signal from volume though so a new sideways trend is also a possibility.

58c on 26 November was the lowest price since around this time last year, so it might be difficult to break below there without a clear fundamental driver, possibly 6 December’s NFP. A move back above 60c seems very unlikely in the next few days unless sentiment shifts notably.

NZD/JPY Might Return to the Range

The fundamental situation for NZDJPY is essentially different from most other pairs with the Kiwi dollar since the Bank of Japan is in a cycle of slow tightening rather than the RBNZ’s relatively aggressive loosening. The probability of a hike by the BoJ on 19 December is now about 60%. Possible new American tariffs on imports would affect both countries, but New Zealand would likely face a much stronger though indirect effect due to its important trade with China.

Although the sideways trend since early October isn’t very well established, the recent downward movement still looks like a fakeout. 27 November’s doji wasn’t followed by a clear down candle and the price is clearly oversold based on Bollinger Bands and the slow stochastic. ¥91 remains the primary reference. A move back above ¥92 seems highly unfavourable in the near future but volume and volatility probably need to increase before there’s another test of the strong support around ¥86.50.

This article was submitted by Michael Stark, an analyst at ExnessExness.

The opinions in this article are personal to the writer. They do not reflect those of Exness or FX Empire.