Date: 08 May 2019
New Zealand Dollar traders await the outcome of the Reserve Bank of New Zealand rate decision, with market consensus split as to whether the RBNZ will cut interest rates at this meeting or whether they will follow the RBA and decide to keep rates on hold and monitor incoming economic data during the second fiscal quarter.
Reserve Bank of New Zealand Governor Adrian Orr has recently stated that an interest rate cut may be on the table this week, as he confirmed that it is becoming increasingly difficult for the New Zealand central bank not to cut interest rates, given the worsening economic data points coming from the New Zealand economy.
Governor Orr also noted that due to a shortage of skilled workers and record export prices, the RBNZ is still considering whether a rate cut is appropriate. New Zealand policymakers have been relying on a pick-up in global growth to bring back inflationary pressure, which has consistently missed the central banks two percent annual inflation target.
The New Zealand economy suffered large data misses during the first quarter of 2019, with the CPI inflation rate dropping to just 1.5 per cent, while job hiring unexpectedly declined, due to the spill-over effects of slowing growth from its major trading partners. It now remains to be seen if the central bank will wait to see if inflation picks-up or act before the economic situation inside New Zealand worsens.
Much like the Australian Dollar, the New Zealand Dollar has been coming under pressure against the greenback due to increasing expectations of an impending interest rate cut. The kiwi is vulnerable to further losses if the Reserve Bank of New Zealand does cut rates, it is also prone to overshoot to the upside if the RBNZ fails to act on Wednesday.
NZD/USD Daily Mountain Chart | Source: ActivTrader
The 0.6580 level is currently acting as major technical support for the NZD/USD pair, while key weekly resistance is now located at the 0.6655 level and 0.6710 levels. A sustained break below the 0.6580 support level exposes the NZD/USD pair to further downside towards the 0.6530 and 0.6490 levels.
Written by Nathan Batchelor, External Analyst, ActivTrades
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