The New Zealand dollar saw a swift turnaround this week after the country’s central bank delivered a widely anticipated interest rate cut—yet it was the tone of their message, not the move itself, that stirred markets. Traders reacted quickly to the shift in sentiment, prompting a strong bounce in NZD/USD as expectations adjusted.
The New Zealand dollar mounted a notable intraday rebound on Wednesday, with NZD/USD climbing from a low of 0.59208 to reach a session high of 0.59795.
This movement followed the Reserve Bank of New Zealand’s (RBNZ) decision to lower its official cash rate by 25 basis points to 3.25%. While the rate cut had been largely priced in, it was the RBNZ’s communication that caught markets off-guard.
RBNZ Governor Christian Hawkesby maintained a balanced tone, emphasising that the central bank had already enacted 225 basis points of easing and that these measures would require time to influence the broader economy.
He indicated that interest rates are now close to neutral—hovering around 3.0%—and that future policy decisions would be made on a meeting-by-meeting basis.
Adding to the cautious sentiment, one committee member voted to hold rates steady, an unusual dissent that increased speculation that the central bank may be nearing the end of its current easing cycle.
This development prompted a rapid adjustment in market expectations. According to swaps pricing, the probability of another rate cut in July fell from 60% to just 36%.
In response, two-year swap rates jumped 11 basis points to 3.230% as investors unwound overly dovish positions.
This sudden shift triggered a short squeeze in Kiwi dollar positions, fuelling NZD/USD’s sharp rally. With the pair now consolidating around 0.5966, bullish traders will likely set their sights on the next major resistance at the seven-month high of 0.6031.
Immediate support is located at 0.5940, followed by the intraday low at 0.5920. Technical momentum remains positive, as reflected in the expanding MACD and strengthening histogram.
NZD/USD bounced strongly from a session low of 0.59208, breaking above short-term resistance to register a high of 0.59795. This move comes after a prolonged downtrend that had kept price action below the 30-period moving average.
The breakout has now pushed the pair above its 5-, 10-, and 30-period moving averages, signalling a short-term bullish shift.
Momentum indicators support this outlook. The MACD shows a firm bullish crossover with a widening gap between the MACD and signal lines, while the green histogram bars continue to rise. If NZD/USD can maintain a position above 0.5950, a retest of the 0.5980 area appears likely.
On the downside, a failure to sustain this level could result in consolidation or a retreat toward the 0.5940 support zone.
The recent recovery in the New Zealand dollar could gain further traction if the US dollar weakens or global risk appetite improves.
However, lingering uncertainty around global economic data and the RBNZ’s openness to future easing means that upside potential may be limited in the near term.
A sustained break above the 0.5980 resistance level would pave the way for a move towards the 0.6030 region.
Conversely, if the pair fails to hold above 0.5950, a pullback towards earlier lows cannot be ruled out.
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