RBNZ Rate-Hike Expectations Remain Intact, Bullish Momentum May Extend

Summary:

Although the sharp decline in crude oil prices has reduced the urgency for the Reserve Bank of New Zealand (RBNZ) to raise interest rates immediately, markets still broadly expect the central bank to begin its tightening cycle later this year. If Wednesday's policy meeting delivers a hawkish message, NZD/JPY could extend its recent rally.

BUY NZDJPY

EXP

TRADING

92.111

Entry Price

97.950

89.200

92.682 +0.684 +0.74%

0.0

Pips

Flat

89.200

Exit Price

92.111

Entry Price

97.950

Fundamentals

Following the sharp decline in global oil prices since mid-June, imported inflation pressures have eased significantly, prompting markets to scale back expectations for an immediate rate hike at Wednesday's RBNZ policy meeting. Lower energy prices have not only reduced near-term inflation risks but have also given policymakers more time to assess domestic economic conditions, particularly ahead of the release of key data, including second-quarter CPI.

Nevertheless, expectations for policy tightening have not disappeared. Markets continue to anticipate that the RBNZ will begin raising the Official Cash Rate (OCR) later this year. From a risk management perspective, lifting the OCR away from its cyclical low and gradually returning policy to a neutral setting remains the preferred course of action. Meanwhile, the recent depreciation of the New Zealand dollar has eased overall financial conditions, reinforcing the case for future monetary tightening.

Within the Monetary Policy Committee, opinions remain divided. Members favoring an earlier rate hike argue that inflation remains above target despite the decline in oil prices, and that restoring interest rates toward neutral would help anchor medium-term inflation expectations. More cautious policymakers, however, emphasize that weak domestic demand and elevated unemployment warrant a measured approach to further tightening.

Committee members also hold differing views on the inflationary impact of lower oil prices. Some believe the energy price shock is temporary and that its effects on inflation are gradually fading, while others warn that price pressures could prove more persistent. Overall, the Committee broadly agrees that the OCR is likely to rise toward 3.00%-3.25% over the next year, although the pace of tightening will remain data-dependent.

Overall, even if the RBNZ leaves interest rates unchanged this week, policymakers are expected to maintain a hawkish forward guidance, preserving the prospect of rate hikes later this year. That policy outlook should continue to provide medium-term support for the New Zealand dollar.

RBNZ Rate-Hike Expectations Remain Intact, Bullish Momentum May Extend_1

Technical Analysis

NZD/JPY is currently trading around 92.15. After completing a recent correction, the pair has stabilized, with its broader bullish structure remaining intact. If the RBNZ maintains a hawkish policy stance this week, expectations for rate hikes later this year could strengthen further, supporting an extension of the current rebound.

In the near term, the interest rate decision will be the primary catalyst for price action. A more explicit signal of future tightening could allow NZD/JPY to break above its recent consolidation range and open the door to further gains. Conversely, if the RBNZ adopts a noticeably more dovish tone, the pair may experience a short-term pullback. However, as long as expectations for rate hikes remain intact, the medium-term outlook is expected to stay constructive.

Trading Recommendation

Trade Direction: Buy

Entry Price: 91.65

Target Price: 97.95

Stop Loss: 89.20

Valid Until: August 6, 2026, 23:55

Support: 91.53 / 91.04 / 90.66

Resistance: 92.49 / 93.81 / 94.96

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