- The New Zealand dollar was slightly lower in European markets early Wednesday.
- As expected, the Reserve Bank of New Zealand cut interest rates by 50 basis points to 4.75%.
- The minutes of the September meeting of the Federal Open Market Committee (FOMC) will be in focus on Wednesday.
The New Zealand dollar (NZD) weakened on Wednesday, reaching its lowest level since mid-August. As expected, the Reserve Bank of New Zealand (RBNZ) decided to cut the Reserve Bank Rate (OCR) by 50 basis points (bps) from 5.25% to 4.75% at its October meeting. The New Zealand dollar attracted some sellers who immediately reacted to the decision. Chinese authorities also disappointed traders by not taking any more significant measures. Since China is New Zealand’s main trading partner, this has also caused the Chinese New Zealand dollar to be weaker than the US dollar.
Investors will now focus on Wednesday’s Federal Open Market Committee (FOMC) meeting. On Thursday, focus on September’s U.S. Consumer Price Index (CPI) data. If the report shows a weaker-than-expected currency, that could weigh on the U.S. dollar and help reduce the pair’s losses.
Daily Summary Market Action: NZD remains weak after RBNZ rate decision
- According to the RBNZ Monetary Policy Statement (MPS), the committee assesses that annual consumer price inflation is within its 1 to 3% inflation target range.
- The Committee agreed that it is appropriate to cut the OCR by 50 basis points to achieve and maintain low and stable inflation while seeking to avoid unnecessary instability in output, employment, interest rates, and the exchange rate, noted the RBNZ MPS.
- Federal Reserve (Fed) Vice Chair Philip Jefferson said on Tuesday the US central bank’s 50 basis points (bps) interest rate cut in September was aimed at keeping the labor market strong even as inflation continues to ease, per Reuters.
- Atlanta Fed President Raphael Bostic stated on Tuesday that the jobs market is not showing signs of weakness, adding that despite significant progress on inflation, overall price figures have not yet hit target levels.
- New York Fed president John Williams said he strongly supported a rate cut by 50 basis points (bps) last meeting and that the two additional 25 bps reduction this year is a “pretty reasonable representation of a base case,” per Reuters.
Analysis: New Zealand dollar continues to decline
The New Zealand dollar is weaker throughout the day. The NZD/USD pair extended its downtrend by dipping below the key 100-day exponential moving average (EMA) and is poised to break below the calendar uptrend. The decline is supported by the 14-day relative strength index (RSI), which is trading below the moving average near 41.10, providing support to nearby sellers.
A decision to move below the resistance level at 0.6135 could result in a move to the psychological level at 0.6000. Continued trading below could result in a drop to the August 15 low of 0.5974.
On the upside, the 100-day EMA at 0.6142 is immediately active for the pair. If the rise continues, a return to 0.6254, the highest level of September 6, will be seen.
