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NZD/CAD climbed to a fresh record high today on the back of the Reserve Bank of New Zealand’s 25bp rate hike. While the decision was widely expected, the New Zealand dollar still surged because the central bank raised its inflation and growth forecasts and said rates will rise by 2% over the next 2 years. With confidence high among consumers and businesses, investment intensions and hiring are expected to improve, the RBNZ sees the prospect of continued momentum in the economy. With today’s move not only has New Zealand become the first major economy to raise interest rates but it also marks the beginning of a longer term tightening phase. Meanwhile the Canadian dollar has been a leading underperformer. Last week the pressure came from softer economic data and this week the move lower has been driven by the sell-off in oil prices. Therefore we expect the New Zealand dollar to extend its gains, which should drive NZD/CAD to new records.
Since NZD/CAD is trading at a record high so there is no obvious resistance level for the pair. 95 cents is a psychologically significant level that could stall gains and above that price point, the rally could meet resistance at every big figure. If NZD/CAD starts to turn lower, 94 cents will be the first level of support followed by the January high of 0.9285.