This week, all eyes will be on the NZD/USD exchange rate as the Reserve Bank of New Zealand (RBNZ) announces its interest rate decision for the second time this year. After dropping to a multi-month low of 0.5940, the pair climbed back up to over 0.6000 following the release of US non-farm payrolls (NFP) data.

The upcoming RBNZ decision on Wednesday is anticipated to be a major highlight in the forex market. Economists predict that the bank will opt to maintain interest rates at 5.5%, where they have stood for the past months.

The RBNZ, like many other central banks, has hinted at ending rate hikes. This upcoming decision will likely indicate when the bank plans to start reducing interest rates.

Recent data suggests that the RBNZ is successfully controlling inflation. The country’s statistics agency reported a decrease in the Consumer Price Index (CPI) to 4.7% in Q4’23, down from 5.8% in the previous quarter.

However, New Zealand's inflation has been declining since reaching a peak of 7.3% in 2022, but it still remains well above the historical average and double the RBNZ target of 2.0%.

Despite inflation improvements, the economy is struggling. Recent statistics reveal a 0.3% contraction in Q4, indicating the economy has entered a technical recession. This may prompt the bank to consider lowering rates in the upcoming meetings to stimulate economic growth.

Following positive US nonfarm payrolls data, it is speculated that the Fed will not reduce rates in May and June as previously assumed. Rate cuts may begin in July followed by another in December.

Looking at the NZD/USD forecast, the pair reached a high of 0.6370 in January due to expectations of Federal Reserve rate cuts, before plummeting to 0.5940 last week. The exchange rate remains below the 50-day and 25-day Exponential Moving Averages (EMA) and retested the Woodie pivot point at 0.6035, suggesting a bearish outlook with a target at 0.5940 and potentially dropping to 0.5850 if the support is breached.