NZD/JPY tanks 80 pips as RBNZ refrained from following RBA’s footsteps

• RBNZ announced a quarter percentage cut to its official cash rate.
• The press conference by the Governor Adrian Orr is in the spotlight.

NZD/JPY slumped 80 pips ahead of trading near 72.20 after the Reserve Bank of New Zealand (RBNZ) announced a 25 basis points (bps) rate cut to its official cash rate.

The New Zealand central bank was previously expected to announce a 0.25% rate cut but earlier surprise by the Reserve Bank of Australia (RBA) dimmed the prospect of such a move since yesterday.

As a result, bears came in power as and when they were offered rate-cut news.

Also adding to the bearish sentiment could be the Japanese Yen’s (JPY) safe-haven appeal. Recent trade tensions amid the US and China together with political noise surrounding the US and Iran increases the importance of risk-safety among traders.

Global barometer of risk sentiment, 10-year US Treasury yields, recovered a bit during early Wednesday but still remains under April low as the US-China trade tensions weigh.

Recently released minutes of the March month monetary policy meeting by the Bank of Japan (BoJ) had a little market reaction as the central bank continued holding its neutral bias.

Having witnessed RBNZ-led moves, the traders may now wait for the Governor Adrian Orr’s speech to determine immediate trading patterns. RBNZ’s Orr has been dovish off-late and might repeat his tune during the press conference.

Technical Analysis

Even if oversold levels of 14-day relative strength index (RSI) signals brighter chances for the NZD/JPY pair’s pullback, three-week-old descending trend-line, and the RBNZ move portrays the underlying weakness to revisit January 04 lows near 71.80 ahead of slumping to July 2016 lows near 71.20.

Meanwhile, 50% Fibonacci retracement level of January – March upside could question immediate recovery near 73.10 whereas 73.50 and earlier mentioned resistance-line at 73.75 may confine additional upside.