- RBNZ keeps policy rate unchanged as expected.
- Bank’s dovish shift in its policy statement weighs on kiwi.
- US Dollar Index stays near yesterday’s closing level ahead of trade balance data from the U.S.
The NZD/USD pair came under heavy selling pressure during the Asian session following the RBNZ monetary policy announcements and dropped to its lowest level in more than two weeks at 0.6793. As of writing, the pair was consolidating its daily losses a little above the 0.68 mark, losing nearly 1.5% on a daily basis.
Although the RBNZ kept its policy rate unchanged at 1.75% as expected, the fact that it changed its forward guidance to say that the next rate move was likely to be down, the kiwi suffered heavy losses against its peers. Commenting on the bank’s dovish shift, “We continue to forecast that the next OCR move is down, but the risk is now that it comes earlier than our forecast of November, given the RBNZ’s tone has shifted to be overtly dovish a little earlier than we thought it might. Like the RBNZ, we’ll be watching both the domestic and global dataflow closely,” said ANZ analysts.
Furthermore, the dismal market sentiment as reflected by the falling global bond yields on Wednesday seems to be putting additional weight on the NZD’s shoulders.
Later in the day, January trade balance data from the U.S. will be looked upon for fresh impetus. Nevertheless, the pair is unlikely to stage a decisive recovery regardless of the data from the U.S. and the greenback’s reaction to it. At the moment, the DXY is virtually unchanged on a daily basis at 96.75.
Technical levels to consider
The initial resistance for the pair aligns at 0.6815 (100-DMA) ahead of 0.6840 (50-DMA) and 0.6900 (psychological level). On the downside, supports are located at 0.6790 (daily low), 0.6750 (Mar. 6 low) and 0.6720 (Feb. 12 low).
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