NZD/USD Plunges as RBNZ Cuts Interest Rate

The New Zealand Dollar (NZD) fell sharply against the US Dollar (USD) yesterday, dragging the price of NZDUSD to less than 0.7250 following the Reserve Bank of New Zealand (RBNZ) decision to cut the benchmark interest rate by 0.25% to 2%. The technical bias, however, remains bullish because of a Higher High in the recent upside rally.

Technical Analysis

As of this writing, the pair is being traded near 0.7201. A hurdle may be noted around 0.7342, the intraday high of yesterday ahead of 0.7744, the major horizontal resistance area. A break and daily closing above the 0.7744 resistance shall expedite the bullish momentum, validating a rally towards the 0.8000 milestone.

On the downside, the pair is likely to find a support around 0.7086-0.7100, the confluence of a horizontal support as well as the psychological number ahead of 0.6951, the swing low of the latest major downside move. The technical bias will remain bullish as long as the 0.6951 support area remains intact.

RBNZ Cuts Rate

New Zealand is the latest developed economy to join the low rates club with its central bank cutting the benchmark rate by 0.25 per cent to 2 per cent. The Reserve Bank of New Zealand (RBNZ) met market expectations by delivering the rate cut and flagged that more monetary policy easing might be needed.

Echoing concerns of Australia’s Reserve Bank, Mr Wheeler said the New Zealand currency was being pushed uncomfortably high as investors search for yield in a low rates world. “The high exchange rate is adding further pressure to the export and import competing sectors,” Mr Wheeler observed in his statement.

Trade Idea

Considering the overall technical and fundamental outlook, selling the pair around the current levels appears to be a good strategy in short to medium term.

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