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NZD/USD at 2014-Trendline after the RBNZ Hints at Pausing Rate Hikes

The Reserve Bank of New Zealand raised its official cash rate by 25 basis points to 3.50%. This is the 4th straight rate hikes in 2014. In today's RBNZ statement, bank governor Graeme Wheeler suggested that there be a "period of assessment before interest rates adjust further towards a more neutral level".

The market therefore should expect the bank to hold rates for the next couple of meetings. However, the interest rate outlook beyond that remains hawkish. 

With that said, we still shouldn't be surprised by a dip in NZD/USD, which is exactly what happened after the RBNZ statement was released.

NZD/USD 4H Chart 7/24

(click to enlarge)

Even though today's statement was relatively dovish. It should be seen as a temporary pause, with future rate hikes on the table. The statement did say there is still more hikes toward a "more neutral level". While the RBNZ pauses, the NZD/USD might also be in consolidation with some near-term bearish risk, but a medium term sideways outlook.

On the daily chart, we can see the pair approaching its 2014-trendline. It will probably test it around the 0.8550-60 area. We should anticipate some bullish attempt from this trendline, but if it breaks, give it some elbow space to the common support area around 0.8515. We can also anticipate buyers here.

(click to enlarge)

Within the sideways outlook, the near to short-term bullish outlook should be limited. We should expect some resistance first at the 0.8650 level, which was a previous support, then the 0.8725-50 area. which contain many support/resistance pivots seen in the 4H chart. 

Even if the 2014-trendline breaks, it is not a sign of reversal, but rather a reflection of consolidation, especially with the current RBNZ stance.