NZD/USD sticks to small gains above 0.72 ahead of RBNZ rate decision

After losing nearly 150 pips since the start of the week, the NZD/USD pair started to retrace its losses on Wednesday before the RBNZ announces its interest rate decision later in the session. As of writing, the pair was trading at 0.7214, gaining 0.1% on the day.

The pair remained below the 0.72 handle for the majority of the day as the greenback stretched its Fed-inspired rally with the US Dollar Index refreshing its monthly high at 93.42 after the data from the U.S. came in above expectations. However, the index seems to have gone into a consolidation phase as investors wait for the US President Trump's tax reform speech in Indiana. At the moment, the index is at 93.20, gaining 0.43% on the day. According to the data released by the U.S. Census Bureau, new orders for manufactured durable goods increased 1.7% on a monthly basis in August after contracting 6.8% in July, surpassing the market estimate of 1%.

Towards the end of the NA session, the RBNZ is going to release its monetary policy statement. “We expect that the final paragraph of the one-page press release will be a repeat of the phrases that have been used more-or-less unchanged for the past five missives: “We expect that the final paragraph of the one-page press release will be a repeat of the phrases that have been used more-or-less unchanged for the past five missives: “Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.” There should be little market reaction to this," wrote Imre Speizer, Research Analyst at Westpac.

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Technical outlook

The RSI indicator for the pair on the H4 chart is moving higher towards the 50 handle, suggesting that the near-term bearish momentum is losing strength. The pair could encounter the immediate support at 0.7200 (psychological level) ahead of 0.7155 (200-DMA) and 0.7110 (Jun. low). On the upside, resistances align at 0.7280 (50-DMA/10-DMA), 0.7340 (Sep. 22 high) and 0.7415 (Sep. 20 high).

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