The New Zealand Dollar is experiencing a decline in early Asian trading on Wednesday, following a significant interest rate cut by the Reserve Bank of New Zealand (RBNZ). The central bank reduced the Official Cash Rate (OCR) by 50 basis points, bringing it down to 4.75% from 5.25%, a move that was widely anticipated by market observers. The immediate response to the rate cut was a sell-off of the Kiwi, which now hovers near its lowest levels since mid-August. Moreover, disappointing economic news from China, New Zealand’s major trading partner, has compounded the pressure on the NZD as traders were hoping for stronger stimulus measures from Chinese officials.
As the day progresses, market participants are focusing on the forthcoming Federal Open Market Committee (FOMC) Minutes, which will provide insights into the US monetary policy direction. Following that, attention will shift to the US Consumer Price Index (CPI) data for September, scheduled for release on Thursday. Should this data indicate softer-than-expected inflation figures, it may lead to a weakening of the US Dollar, potentially mitigating further losses for the NZD/USD pair.
The RBNZ’s latest Monetary Policy Statement underscores that the committee believes inflation remains within its target range of 1 to 3%, a critical factor in justifying the recent rate cut. The central bank aims to maintain low and stable inflation while minimizing instability in economic output and employment levels.
Overall, the NZD/USD is trending downward, currently trading below the 100-day Exponential Moving Average (EMA) and threatening to break out of its established ascending trend channel. With the 14-day Relative Strength Index (RSI) positioned below the neutral level, the selling pressure may continue in the short term. Should the Kiwi breach the psychological support level at 0.6135, it may lead to a decline towards 0.6000, and potentially to the August 15 low of 0.5974. Conversely, resistance is identified at the 100-day EMA of 0.6142, with further upward movements potentially targeting levels of 0.6254 and 0.6300.
