NZD/USD Price Forecast: Plunges below 0.6100 on RBNZ 50 bps rate cut

NZD/USD plummets below 0.6100 as the RBNZ reduced its OCR further by 50 bps to 4.75%.
The RBNZ was expected to deliver a hefty rate cut amid weak growth prospects.
Investors await the FOMC minutes for fresh cues on the interest rate outlook.

The NZD/USD pair faces an intense sell-off and slides below the round-level support of 0.6100 in Wednesday’s North American session. The Kiwi pair plunges as the Reserve Bank of New Zealand (RBNZ) has cut its Official Cash Rate (OCR) by 50 basis points (bps) to 4.75%.

The RBNZ was expected to deliver a larger-than-usual interest rate cut due to softening labor market conditions and subdued growth. Market participants expect the RBNZ to reduce interest rates at a similar pace again in November.

Meanwhile, dismal market sentiment due to Middle East risks has also dampened the appeal of risk-sensitive assets. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, climbs to near 102.70.

The US Dollar strengthens as traders have priced out the scenario of the Federal Reserve (Fed) to reduce interest rates again by 50 bps in November. The Fed started the policy-easing cycle with a sizeable cut of 50 bps in September. Meanwhile, investors await Federal Open Market Committee (FOMC) Minutes for the September meeting, which will be published at 18:00 GMT.

NZD/USD weakens after breaking below the horizontal support plotted from the September 11 low of 0.6100 on a daily timeframe. The overall trend of the Kiwi pair has become bearish as it has formed a lower swing low. The asset is also trading below the 50-day Exponential Moving Average (EMA), which trades around 0.6173.

The 14-day Relative Strength Index (RSI) slides below 40.00, suggesting that a bearish momentum has been triggered.

More downside is highly likely towards the psychological support of 0.6000 and the August 15 low of 0.5974.

On the flip side, a reversal move above the October 8 high of 0.6146 will drive the asset towards the 50-day EMA at 0.6173 and the October 4 high near 0.6220.

NZD/USD daily chart

Economic Indicator

RBNZ Interest Rate Decision

The Reserve Bank of New Zealand (RBNZ) announces its interest rate decision after its seven scheduled annual policy meetings. If the RBNZ is hawkish and sees inflationary pressures rising, it raises the Official Cash Rate (OCR) to bring inflation down. This is positive for the New Zealand Dollar (NZD) since higher interest rates attract more capital inflows. Likewise, if it reaches the view that inflation is too low it lowers the OCR, which tends to weaken NZD.

Why it matters to traders?

The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish. The policy announcements are usually followed by Governor Adrian Orr’s press conference.

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.