The RBNZ delivered on another rate cut today, bringing the overnight cash rate to 2.25%. However, the central bank signaled that this should be the last rate cut and even mentioned that the board debated between holding rates or cutting them again already this time around.
Their future projections now see overnight cash rate at 2.25% for early 2026 before climbing to 2.65% by late 2027. It's lower than their previous forecast but enough to convince markets that there won't be any more rate cuts coming after having already delivered over 300 bps of rate cuts since the cycle began in August 2024.
The kiwi dollar duly rallied with the high earlier for NZD/USD coming close to touch 0.5700 before squaring up against some resistance from the mid-November highs:
The near-term chart may be more bullish again but the rejection closer around 0.5690-95 sees sellers draw a firm first line of defense in keeping the upside momentum more limited.
Despite the more positive risk mood this week, NZD/USD has struggled to really gather much traction and that's not quite a good sign for sentiment in the kiwi dollar. In fact I would argue that for the pair to really break the mould, buyers have plenty of work to do as the downside momentum for the pair has largely held ever since July until now.
A series of lower highs and lower lows continue to define how we are trading for NZD/USD. So unless there is a break in the pattern, sellers will have reason to stick to their conviction here.
