NZD/USD Heads Towards a Losing Year Despite Hawkish RBNZ

  • NZDUSD
    (${instrument.percentChange}%)

Poor 2021

During the current month, the pair managed to pause its five-week losing streak, but could not avoid new 2021 lows and struggles to avert a negative close in December.

This was its worst streak since the start of 2020 and in November it registered its biggest decline in around four years, heading towards the conclusion of a poor year.


Past Performance: Past Performance is not an indicator of future results.

Monetary Policy

All these despite the hawkish trajectory by the Reserve Bank of New Zealand, which has been in the forefront of monetary policy normalization. The central bank concluded its asset purchase program in July [1] and delivered two back-to-back rate hikes in October and November, bringing the Official Cash Rate (OCR) at 0.75% [2],[3].

This had helped NZD/USD in October, but the Federal Reserve turned extremely hawkish in November and announced the reduction of its Quantitative Easing program that month [4] and Chairman Powell put the term transitory to rest, in regards to high inflation [5]. This pivot culminated in December's decision to speed-up the QE tapering [6] and the projection of three rate hikes in 2022 [7].

NZD/USD

The pair's recent recovery effort has been anemic and so far it is contained at the 23.6% Fibonacci of the October/November decline. This can to lead to continuation of the descending trend and fresh lows (current at 0.6700). Daily closes above 23.6% on the other hand, have the ability to lift the Kiwi towards the next Fibonacci level at 0.6898.


Past Performance: Past Performance is not an indicator of future results.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 29 Dec 2021 https://www.rbnz.govt.nz/monetary-policy/monetary-policy-tools/large-scale-asset-purchases

2

Retrieved 29 Dec 2021 https://www.rbnz.govt.nz/news/2021/10/monetary-stimulus-further-reduced-official-cash-rate-raised-to-050-percent

3

Retrieved 29 Dec 2021 https://www.rbnz.govt.nz/news/2021/11/mpc-continues-to-reduce-monetary-stimulus

4

Retrieved 29 Dec 2021 https://www.federalreserve.gov/monetarypolicy/files/monetary20211103a1.pdf

5

Retrieved 29 Dec 2021 https://www.banking.senate.gov/hearings/cares-act-oversight-of-treasury-and-the-federal-reserve-building-a-resilient-economy

6

Retrieved 29 Dec 2021 https://www.federalreserve.gov/monetarypolicy/files/monetary20211215a1.pdf

7

Retrieved 26 May 2022 https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20211215.pdf

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