The RBNZ kept the OCR at 2.25% on Wednesday. Its updated rate track suggests the first possible hike could come in late 2026. The bank sees the OCR reaching 3% by 2028.
CPI inflation is 3.1%, which is above the RBNZ’s 1% to 3% target band. The Governor said inflation should return to 2% without any urgent policy action.
Central Banks Signal Diverging Paths
The Fed held rates at 3.50% to 3.75% in January. FOMC minutes noted that disinflation may be “slower and more uneven” than expected.
NZD/USD fell to 0.5945 on Thursday, dropping below 0.6000 for the first time in more than two weeks. The pair is still above the 50-day EMA at 0.5905 and the 200-day EMA at 0.5875, after bouncing from lows near 0.5711.
The drop from the 0.6094 year-to-date high broke the late-January trading range. The Stochastic Oscillator has turned down from around the midpoint.
Support is near 0.5909 and 0.5856. Resistance is at 0.6000, then 0.6050 and 0.6094.
Strategy And Key Levels Ahead
Key events ahead include New Zealand’s January trade balance, a later speech from the Governor, and US Q4 GDP and core PCE on Friday.
The Reserve Bank of New Zealand has recently shifted to a more dovish tone. This sets a clearer near-term direction. With the Federal Reserve still sounding hawkish, the widening policy gap supports selling NZD/USD on rallies. Overall, the fundamentals point to a lower exchange rate in the coming weeks.
That view was strengthened by US core PCE data for January, which was hotter than expected at 0.5% month over month. In contrast, New Zealand’s latest trade figures showed a larger-than-expected deficit of NZ$1.2 billion, driven by weaker dairy exports. The latest data from the two countries is moving in opposite directions.
After the clear break below 0.6000, NZD/USD put options look worth considering. Strike prices near the 50-day moving average around 0.5900, with March or April expiry, may be attractive. This approach targets further downside while limiting potential losses.
The technical setup also supports bearish momentum, with the Stochastic Oscillator pointing lower. In addition, China’s Caixin Manufacturing PMI slipped to 49.8, which signals a mild contraction. This could weaken New Zealand’s export outlook and adds another headwind to the NZD.
A similar policy divergence in mid-2025 pushed the pair more than 400 pips lower. The current break below 0.6000 may be the start of another sustained move. The next major support level to watch is the 200-day moving average, now near 0.5875.
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