NZD/USD Nosedives Below 0.6500 Post RBNZ Rate Cut08 August, 2019 by Aayush Jindal in Market Analysis
- The New Zealand Dollar declined heavily below the 0.6500 support against the US Dollar.
- Two bearish trend lines are forming with resistance near 0.6535 on the 4-hours chart of NZD/USD.
- The Reserve Bank of New Zealand reduced the official cash rate (OCR) from 1.5% to 1.0%.
- The US Initial Jobless Claims for the week ending 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%.
Looking at the 4-hours chart, the pair broke many key supports near the 0.6580 and 0.6500 levels. Moreover, there was a close below the 0.6500 support and the 100 simple moving average (red, 4-hours).
Finally, the pair spiked below the 0.6400 level and a new monthly low was formed near 0.6377. Recently, the pair started a short term upside correction above the 0.6400 level plus the 23.6% Fib retracement level of the downward move from the 0.6586 high to 0.6377 low.
On the upside, there are many resistances near the 0.6480 and 0.6500 levels. Moreover, there are two bearish trend lines forming with resistance near 0.6535 on the same chart.
The 50% Fib retracement level of the downward move from the 0.6586 high to 0.6377 low is also near the 0.6480 level. Therefore, NZD/USD is likely to face a strong selling interest near the 0.6480 and 0.6500 levels.
On the downside, an immediate support is near the 0.6400 level, below which the pair may perhaps break the 0.6377 low and continue lower.
Fundamentally, the RBNZ interest rate decision announced recently impacted the market sentiment. The market was looking for a rate cut from 1.50% to 1.25%.
However, the result was negative as the central bank reduced the official cash rate (OCR) from 1.5% to 1.0%, citing requirements to meet their employment 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.
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.