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Market Remains in a Strong Consolidation Phase, Not a Reversal; Bullish Structure Intact
Summary:
The Reserve Bank of New Zealand holds rates steady to assess the impact of Middle East tensions and surging oil prices; the timing of rate hikes may be brought forward from December to September.
Buy
TradingEURNZD
EXP
1.99521
Entry Price
2.06170
TP
1.97390
SL
2.00701 +0.01079 +0.54%
0
Point
Flat
1.97390
SL
CLOSING
1.99521
Entry Price
2.06170
TP
Fundamentals
The Reserve Bank of New Zealand (RBNZ) announced on Wednesday that it would keep the Official Cash Rate unchanged at 2.25%, as policymakers opted to pause in order to assess the potential impact of escalating Middle East tensions and rising oil prices on the country’s fragile economic structure. The decision was broadly in line with market expectations.
This pause follows an aggressive easing cycle. Since August 2024, amid easing inflation and slowing economic growth, the RBNZ has delivered a cumulative 325 basis points of rate cuts. However, price pressures are now showing signs of re-emergence. Inflation has risen to 3.1%, once again approaching—and potentially exceeding—the upper bound of the central bank’s 1%–3% target range. With Middle East tensions driving up energy and transportation costs, imported inflation risks are building rapidly, and upward pressure on prices is unlikely to ease in the near term.
From a policy perspective, markets are reassessing the RBNZ’s rate path. Although the central bank held rates steady as expected, concerns over “second-round inflation effects” have become increasingly prominent. Should further evidence emerge that cost-push inflation is feeding more broadly into the pricing system, the policy stance could shift quickly toward a more forward-looking tightening bias.
Based on the current inflation trajectory and evolving external shocks, we expect the timing of rate hikes to be brought forward from the previously anticipated December to September, with the possibility of an even earlier start not ruled out. In terms of pace, the RBNZ is likely to adopt a gradual tightening cycle, delivering 25 basis point hikes at each meeting, balancing the need to contain inflation against the risk of excessive economic slowdown.
Overall, the policy focus is shifting from growth support toward renewed inflation control, with uncertainty around the monetary policy outlook increasing significantly.
Technical Analysis
EUR/NZD is currently trading above the key psychological level of 2.0000, with the broader structure remaining medium-term bullish. From a price action perspective, the pair has entered a high-level consolidation phase following a strong prior rally. While bullish momentum has moderated, there are no clear signs of a trend reversal.
From a structural standpoint, the 2.0000 level serves as both a key psychological support and a focal point for recent bull-bear positioning. As long as price holds above this level, bulls retain structural control, and the pair is likely to continue its upward consolidation, with scope to retest the previous highs in the 2.0300–2.0400 range.
In the short term, a pullback toward the 1.9900–1.9950 zone that finds support would be viewed as a healthy correction, allowing bulls to rebuild momentum. This area also represents an ideal defensive zone for short-term long positioning.
On the downside, a decisive break below 1.9850 would signal a breakdown of the current consolidation structure, potentially triggering a deeper correction toward the 1.9700 region, with scope to fill the previous upside gap.
Overall, as long as EUR/NZD remains above 2.0000, the market is best characterized as being in a strong consolidation phase rather than a reversal, with the bullish structure still intact.
Trading Strategy
Direction: Buy
Entry: 1.9920
Target: 2.0617
Stop Loss: 1.9739
Valid Until: 2026-05-08 23:55
Support Levels: 1.9980, 1.9952, 1.9922
Resistance Levels: 2.0032, 2.0086, 2.2007
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