RBNZ Official Cash Rate – NZD/USD Technical Analysis

Talking Points:

Weekly Chart Analysis
Commitment of Traders Report Analysis
Important Trading considerations for all NZD pairs.

An important day for the New Zealand Dollar this week as markets await the Reserve Bank of New Zealand’s Official Cash Rate announcement, RBNZ Monetary Policy Statement, RBNZ Rate Statement, and RBNZ Press Conference, the current official cash rate is 5.50% and the forecast is the same. It is not expected that RBNZ will take a different path with interest rate hikes that are different from other major central banks.

The available data as of the latest RBNZ meeting reflects a slower economy and a weaker labor market. The data released from China which has a high impact on New Zealand continued to show that the economy is struggling, with the manufacturing sector extending its contraction and the non-manufacturing sector slowing. A slowing economy and declining inflation are not supportive factors for raising rates.

Weekly Chart Analysis

Source: Tradingview.com

Price is trading within a descending channel and currently near the channel range midpoint.
Multiple bottom formations as price action continued to find support along the lower border of the descending channel, if the pattern resumes its formation, it may suggest further upside price action up to the resistance line.
Although on light volume, price action broke and closed above the 3 Moving averages, EMA9, MA9, and MA21.
A confluence of support is represented by 3 moving averages, EMA9, MA9, MA21, Monthly R1, and the psychological level of 0.6000.
A confluence of resistance is represented by the upper channel border, the annual pivot point, the Monthly R3, and the psychological level of 0.6300.
The latest upside price action (Last two weeks) took place with below-average Tick Volume which is not supportive of the move.
MACD line broke above its signal line and is in line with price action.

Commitment of Traders – COT – Traders in Financial Markets – TIFF Report – As of November 24^th, 2023

Source: Cotbase.com

The commitment of trader’s report indicates that large speculators’ positions level is at a 3-year short extreme which suggests that a change in sentiment may be due. (Circles)
The leveraged funds’ positions level is at a 1-year short extreme and suggests a potential change in Sentiment.
Commercial traders’ positions level is at a 3-year-long extreme and in line with Large Speculators’ position changes.(Circles)
On the other hand, Leveraged Funds’ position changes indicate a long-term positive divergence which has been in play as early as January 2023, however, price action remained in its downtrend, though at a slower pace. (highlighted)
We also have a potential short-term Negative divergence only for the most recent price action as of late October 2023. (Short black arrow)

Important Trading Considerations for all NZD Pairs

Traders who are familiar with New Zealand Dollar trading usually need to consider a few points:

The trading day in New Zealand starts around the time when the US, Europe, and Asia markets are closed which means that there is less than average liquidity in the markets. The end of the trading day is at 5 PM EST (New York) which is the beginning of the trading day in New Zealand (Depending on Daylight Savings). Please check your local time.
Finance fees (Rollover) are usually calculated at 5 PM EST (In some cases, can be as early as 3 PM EST)
Low market liquidity around 5 PM EST can result in higher spreads, and erratic price movements and can also cause triggering any type of entry order, stops and limits.

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