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NZD/USD Nosedives Below 0.6500 Post RBNZ Rate Cut

Aayush Jindal

Aayush Jindal

Key Highlights

  • The New Zealand Dollar declined heavily belowthe 0.6500 support against the US Dollar.
  • Two bearish trend lines are forming withresistance near 0.6535 on the 4-hours chart of NZD/USD.
  • The Reserve Bank of New Zealand reduced theofficial cash rate (OCR) from 1.5% to 1.0%.
  • The US Initial Jobless Claims for the weekending August 03, 2019 might remain stable at 215K.

NZDUSD Technical Analysis

The New Zealand Dollar started a steady decline from the 0.6800 resistance against the US Dollar. However, the decline in NZD/USD got momentum after the RBNZ reduced interest rates from 1.5% to 1.0%.

NZDUSD Technical Analysis Kiwi Dollar US Dollar

Looking at the 4-hours chart, the pair broke many keysupports near the 0.6580 and 0.6500 levels. Moreover, there was a close belowthe 0.6500 support and the 100 simple moving average (red, 4-hours).

Finally, the pair spiked below the 0.6400 level and a newmonthly low was formed near 0.6377. Recently, the pair started a short termupside correction above the 0.6400 level plus the 23.6% Fib retracement levelof the downward move from the 0.6586 high to 0.6377 low.

On the upside, there are many resistances near the 0.6480and 0.6500 levels. Moreover, there are two bearish trend lines forming withresistance near 0.6535 on the same chart.

The 50% Fib retracement level of the downward move from the0.6586 high to 0.6377 low is also near the 0.6480 level. Therefore, NZD/USD islikely to face a strong selling interest near the 0.6480 and 0.6500 levels.

On the downside, an immediate support is near the 0.6400level, below which the pair may perhaps break the 0.6377 low and continuelower.

Fundamentally, the RBNZ interest rate decision announcedrecently impacted the market sentiment. The market was looking for a rate cut from1.50% to 1.25%.

However, the result was negative as the central bank reducedthe official cash rate (OCR) from 1.5% to 1.0%, citing requirements to meet theiremployment and inflation objectives.

The report added that:

In New Zealand, low interest rates and increased government spending will support a pick-up in demand over the coming year. Business investment is expected to rise given low interest rates and some ongoing capacity constraints. Increased construction activity also contributes to the pick-up in demand.

Overall, NZD/USD is facing an uphill task and remains at a risk of more downside, similar to GBP/USD. On the other hand, EUR/USD started a decent recovery above 1.1150.

Economic Releases to Watch Today

  • US Initial Jobless Claims - Forecast 215K,versus 215K previous.
  • US Wholesale Inventories for Feb 2019(preliminary) – Forecast +0.2%, versus +0.2% previous.