The RBNZ kept the OCR at 2.25% on Wednesday. An updated rate track pointed to the first possible hike in late 2026, with the OCR seen at 3% by 2028.
CPI inflation is 3.1%, above the RBNZ’s 1% to 3% target band. The Governor said inflation is expected to return to 2% without urgent policy action.
Central Banks Signal Diverging Paths
The Fed held rates at 3.50% to 3.75% in January. FOMC minutes said disinflation may be “slower and more uneven” than expected.
NZD/USD fell to 0.5945 on Thursday and moved below 0.6000 for the first time in over two weeks. It remains above the 50-day EMA at 0.5905 and the 200-day EMA at 0.5875, after rising from lows near 0.5711.
The move down from the 0.6094 year-to-date high broke the late-January range. The Stochastic Oscillator has turned lower from around the midline.
Support levels are near 0.5909 and 0.5856. Resistance is at 0.6000, then 0.6050 and 0.6094.
Strategy And Key Levels Ahead
Upcoming events 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’s recent dovish turn creates a clear path for us in the near term. The widening policy gap with the still-hawkish Federal Reserve suggests selling into any NZD/USD strength. We see the fundamental backdrop as firmly favouring a lower exchange rate over the coming weeks.
This view was reinforced by this morning’s US core PCE data for January, which came in hotter than expected at 0.5% month-over-month. This contrasts with New Zealand’s latest trade balance figures, which showed a wider-than-expected deficit of NZ$1.2 billion, driven by falling dairy exports. The economic data from both countries is clearly moving in opposite directions.
Considering the decisive break below the 0.6000 level, we should be looking at buying NZD/USD put options. Strike prices near the 50-day moving average at 0.5900 for March or April expiry look attractive. This allows us to position for further downside while capping our potential loss.
The technical picture supports this bearish momentum, with the Stochastic Oscillator pointing firmly lower. We are also noting that recent data showed China’s Caixin Manufacturing PMI slipping back to 49.8, signaling a slight contraction that could further dampen New Zealand’s export outlook. This external headwind adds conviction to a short position.
We remember a similar divergence in policy unfolding in mid-2025, which ultimately drove the pair down over 400 pips. The current break below 0.6000 could be the start of a similar sustained move. The next major level of support we are watching is the 200-day moving average, which now sits near 0.5875.
