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New Zealand Dollar (NZD) Rallies Hard as Rate Hike Expectations Jump Further

New Zealand Dollar (NZD) Rallies Hard as Rate Hike Expectations Jump Further

Nick Cawley, Strategist

New Zealand Dollar (NZD/USD) Price, Chart, and Analysis

  • Hot New Zealand job market ramps up rate hike bets.
  • New Zealand dollar jumps across the board
  • Retail trade data highlights a bullish contrarian NZD/USD bias
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New Zealand unemployment fell sharply in the June 2021 quarter to 4.0% from 4.6% in the March quarter, while the employment rate rose to 67.6%, up 0.5% on the quarter and 0.6% on an annualized basis. Both figures beat market expectations by a wide margin and further increased predictions of a rate hike to 0.50%, from the current level of 0.25%, at the RBNZ’s next policy meeting on August 18.

Today’s employment data follows a warning from the RBNZ yesterday that the central bank is considering tighter mortgage lending standards in an effort to dampen the country’s red hot housing market. The RBNZ is considering ways to ensure ‘borrowers are resilient to a range of future economic and financial conditions. We are particularly concerned about those who have borrowed in the past 12 months at high LVRs (Loan-to-Value ratios) and high DTIs (Debt-to-Income)’.

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The New Zealand dollar rose sharply for the second day in a row as the market continued to price-in rate hike expectations. The Kiwi is currently trading 0.50%+ higher against a range of other currencies with NZD/USD printing a fresh one-month high earlier in today’s session. The daily chart shows the pair in overbought territory, suggesting a short-term period of consolidation may be on the horizon, while the pair has also broken above the 20- and 50-day simple moving averages for the first time in two months. With interest rate hikes now looking fully priced in, Friday’s US jobs report will likely be the short-term driver for the pair. In the medium- to longer-term, the outlook for NZD/USD remains positive.

NZD/USD Daily Price Chart (November 2020 – August 4, 2021)

Retail trader data show46.66% of traders are net-long with the ratio of traders short to long at 1.14 to 1. The number of traders net-long is 1.52% higher than yesterday and 3.46% lower from last week, while the number of traders net-short is 16.41% higher than yesterday and 12.98% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests NZD/USD prices may continue to rise.Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger NZD/USD-bullish contrarian trading bias.

NZD/USD Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -1% -2% -1%
Weekly -2% 3% -1%
What does it mean for price action?
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What is your view on the New Zealand Dollar – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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