NZD/USD Plunges Following RBNZ Decision

The exchange rate fell by 1.1% after the Reserve Bank of New Zealand cut interest rates by 25 basis points to 5.25% and signalled further easing.

According to RBNZ Governor Adrian Orr:
→ Inflation is returning to the target range, and the bank may begin normalising rates;
→ Several scenarios were considered, and consensus was reached for a 25 basis point rate cut;
→ Forecasts indicate that New Zealand is moving towards a period of low and stable inflation;
→ The economy is meeting expectations, although high-frequency data show some weakening.

The rate cut decision was somewhat unexpected, as the RBNZ had previously forecast that the rate-cutting cycle would start later. This has resulted in increased volatility in the NZD/USD chart today.

According to technical analysis of the NZD/USD chart:
→ In August, the price formed an ascending channel (shown in blue);
→ Yesterday, a bearish Double Top pattern emerged above the upper boundary of the channel—this was a warning signal for bulls, considering that the RSI indicator was in overbought territory;
→ The RBNZ decision pushed the price to the channel’s median, which is acting as support.

It is possible that the median may be breached by bears and the decline could continue. If so, support may be anticipated at the psychological level of 0.600 and the 0.598 level, which acted as resistance in early August before switching roles.

Much of the future direction of the NZD/USD rate will depend on news from the US: today, at 15:30 GMT+3, the Consumer Price Index (CPI) figures will be released.

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