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RBNZ Expected to Begin Rate-Hike Cycle in September, Medium-Term Target Remains at 100.00
Summary:
With tensions in the Middle East easing and oil prices retreating, the case for the Reserve Bank of New Zealand (RBNZ) to remain on hold in the near term has strengthened. However, the central bank is still expected to begin its rate-hike cycle in September. Improving fundamentals, coupled with a constructive medium-term outlook for the New Zealand dollar, suggest that pullbacks in NZD/JPY continue to present buying opportunities.
Buy
TradingNZDJPY
EXP
91.488
Entry Price
96.120
TP
89.890
SL
92.310 +0.820 +0.90%
0
Point
Flat
89.890
SL
CLOSING
91.488
Entry Price
96.120
TP
Fundamentals
Although fresh conflict erupted in the Middle East over the weekend, markets generally believe the probability of an eventual peace agreement remains high. As international oil prices have fallen back to pre-conflict levels, energy cost pressures have eased significantly, risk sentiment has improved, and global demand is expected to recover gradually.
For New Zealand, the surge in oil prices slowed the pace of economic recovery and weighed on consumer spending and business investment, but it did not derail overall economic activity. Against this backdrop, the RBNZ has ample justification to leave the Official Cash Rate (OCR) unchanged at its July policy meeting.
At the same time, the rapid easing of geopolitical tensions has reduced concerns over imported inflation, resulting in a more benign inflation outlook and diminishing the need for an aggressive tightening cycle.
We expect the RBNZ to officially begin a new rate-hike cycle in September, followed by only two additional rate increases this year, compared with our previous expectation of three. Under this scenario, the OCR is projected to peak at 4.00% by the end of 2027 before gradually easing back to the neutral level of around 3.75% by the end of 2028.
Although the terminal rate forecast has been revised down from 4.25%, the overall policy stance remains biased toward further tightening, which should continue to provide medium-term support for the New Zealand dollar.
Technical Analysis
NZD/JPY has recently pulled back toward its previous consolidation zone and is now trading around the 91.00 area. While the risk of intervention by Japanese authorities remains a potential headwind, the yen is unlikely to stage a sustained appreciation before any actual intervention takes place.
From a medium- to long-term perspective, the broader uptrend remains intact. The current pullback appears to be a corrective move within the prevailing bullish trend. As long as support around 91.00 holds, the pair is expected to gradually advance toward the psychological 100.00 level over the next 12 months.
Trading Recommendation
Direction: Buy
Entry: 91.00
Target: 96.12
Stop Loss: 89.89
Valid Until: 2026-07-28 23:55
Support: 90.52, 90.65, 89.97
Resistance: 92.75, 93.81, 94.97
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