BlackRock Sees RBNZ Raising Rates by Half-Percent; NZDUSD Intraday Technicals

by on December 20, 2013 4:31 am GMT

BlackRock is the world’s largest asset manager with over $4 trillion worth of assets under management. Yes, $4 trillion as in the Federal Reserve’s balance sheet. And they believe the Reserve Bank of New Zealand (RBNZ) will increase their benchmark rate by a half-percent at its first policy meeting in 2014 based on growth progressing.

Since 2011, the New Zealand central bank has kept rates at 2.5 percent, a record low. The economic data has been promising out of New Zealand, and overnight index swaps are forecasting a 62 percent chance for the benchmark rate to increase to 2.75 percent. However, RBNZ Graeme Wheeler has said that the kiwi is overvalued and an increase NZ dollar could potentially hurt exports.

Unfortunately, many traders are looking for parity between the Australian and New Zealand dollars. “Higher rates may help drive the kiwi dollar close to a record-high against Australia’s currency,” said Stephen Miller, a money manager at BlackRock base in Sydney. Miller also said, “New Zealand’s a pretty strong economy getting stronger. It’s one of these stories where higher interest rates are actually a harbinger of a healthier economy.”

In “NZ Sees Budget Surplus, NZDUSD Outlook:12/16,” price action was coiling up in the apex of converging lines. In the upside target, which I favored more, there was the potential for price action to go above .83 because of the current. Resistance of .8285 held strong and pushed the kiwi through the downside target of .8200, where the ascending trend line resided.

Support was found at .8150, and the NZDUSD currently trading just above .8200. Price action was able to close above .8200, but a series of EMAs will act as resistance. The 20 EMA is currently rejecting price action, and a close below .8200 will likely signal more downward movement.

The kiwi will likely finish the week between .8150 and .8175, while a pull back to .8225 is possible.

4H Chart of NZDUSD

4H Chart of NZDUSD