FxWirePro:NZD/JPY slumps over 1.10%, breach below cloud will drag the pair lower

NZD/JPY chart - Trading View 

Spot Analysis:

NZD/JPY slumped 1.11% and was trading at 76.68 at around 10:15 GMT

Previous Session's High/Low: 77.71/ 76.98

Previous Week's High/Low: 78.15/ 76.43

Fundamental Overview:

The Reserve Bank of New Zealand (RBNZ) matched wide market expectations with 25 basis points (bps) rate hike at its policy meeting early on Wednesday.

New Zealand's central bank hiked interest rates for the first time in seven years and signalled further tightening to come. 

The 25 basis point rate hike marks the start of a tightening cycle as the central bank looks to get on top of inflationary pressures and cool a red-hot housing market.

Future moves depend on the medium-term outlook for inflation and employment. The central bank expects headline CPI inflation to increase above 4% in the near-term but return towards its 2% midpoint over the medium term.

Economists expect the benchmark rate to reach 1.50% by the end of next year and 1.75% by the end of 2023.

Technical Analysis:

- NZD/JPY erases most of the gains of the previous three session

- Price action has slipped below 200-DMA support

- The pair is testing support at daily cloud top, breach below will drag prices lower

- RSI converges with price action, momentum is bearish

- Volatility is high and GMMA indicator shows a bearish shift on the intraday charts

Major Support and Resistance: 

Support levels - 76.66 (Cloud top), Resistance levels - 77.13 (200-DMA)

Summary: NZD/JPY bias neutral as long as pair holds cloud support. Breach below cloud will open downside. Failure to close below 200-DMA could negate any further bearish bias.