FX Daily Strategy: Europe, Jul 8
RBNZ Hike by 25bps
Rate path Could Disappoint Kiwi Hawks
USD/JPY Remain in Intervention Zone
The RBNZ decision is announced on Wednesday Asia morning and they have hiked rates by 25bps to 2.5% in the July meeting unanimously. It is a decisive shift from May's split hold and led the RBNZ into its tightening cycle. Forward guidance sound hawkish but clearly indicates uncertainty ahead.
However, market participants will be disappointed, seeing major central banks peers turned towards a tightening bias from the energy driven inflation in H1 2026 while RBNZ somewhat indecisive. On the chart, there is little change as prices extend consolidation around the .5700 level having settled back from the .5725 high. However, daily studies remains positive and highlights room for further gains ahead to retrace recent sharp losses from the mid-June high to the .5750 congestion. Higher will see scope for extension to strong resistance at the .5770/80 area. Meanwhile, support at .5680 should now underpin and sustain bounce from the .5625 low. Failure here, will extend the January losses and see room to .5600/.5578, channel support and November low.
Despite some ebbs and flows, USD/JPY remain in intervention territory. The Japan side has turned to "silent intervention", which means they will be no longer jawboning before acting, thus the market will be susceptible to sudden moves even it is not an actual intervention from the BoJ. A slow grind higher still seems more likely right now, unless there is surprise from either the BoJ or the Fed.
On the chart, consolidation above the 161.00 level has given way to sharp bounce to regain the 162.00 level. Bullish price action highlights scope for retest of the 162.84 high. Break here if seen, will extend the underlying bull trend and see room for extension to 163.00/164.00 congestion from December 1986. Meanwhile, support remains at the 161.00 level which should underpin. Would take break here to expose the 160.48 Friday's low to retest and threatens deeper pullback to retrace rally from the May low to the 160.00 figure and strong support at 159.50.