NZD/USD Price Outlook: RBNZ Jawbones New Zealand Dollar Lower
NEW ZEALAND DOLLAR FORECAST: RBNZ MONETARY POLICY EASING TO WEIGH NEGATIVELY ON NZD/USD PRICE ACTION
- New Zealand Dollar comes under pressure following the latest RBNZ interest rate decision
- NZD/USD price action plunges in response to increasingly dovish remarks from the MPC
- Reserve Bank of New Zealand highlights how significant economic challenges remain
A combination of New Zealand Dollar weakness and US Dollar strength has caused NZD/USD price action to tumble 75-pips so far during Wednesday’s trading session. The New Zealand Dollar has slid aggressively in response to forward guidance just provided by the RBNZ. Meanwhile, with volatility on the rise, US Dollar buying pressure looks rekindled as market sentiment deteriorates amid a recent acceleration in coronavirus second wave risk.
Increasingly dovish commentary from the Reserve Bank of New Zealand, which was detailed in a press statement accompanying the latest Monetary Policy Committee’s overnight cash rate decision, underscored how economic risks remain skewed to the downside despite positive effects from recent stimulus efforts. The RBNZ noted that ‘severe economic disruption’ caused by the coronavirus pandemic has persisted and continues to impact New Zealand economic activity negatively.
Also, it seems like the RBNZ attempted to jawbone the New Zealand Dollar lower in light of remarks underscoring how recent appreciation by the Kiwi has introduced added headwinds for inflation and export growth. Further, the MPC noted that the Reserve Bank of New Zealand is prepared to provide additional monetary stimulus as needed and how the central bank might expand its asset purchase program.
NZD/USD PRICE CHART: DAILY TIME FRAME (05 MAR TO 24 JUN 2020)
NZD/USD price action correspondingly dropped back below its short-term moving average (8-day EMA). If appetite for risk fades further, and New Zealand Dollar selling gains pace, there is potential for spot NZD/USD to edge lower toward its medium-term moving average (34-day EMA). This area of technical support is also underpinned by the 23.6% Fibonacci retracement of the Kiwi-Dollar’s trading range since the mid-March swing low.
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