NZD/USD extends dovish RBNZ-led slide, weakens further below mid-0.6400s

• Dovish sounding RBNZ policy statement prompted some selling around the NZD/USD on Wednesday.
• A turnaround in the risk sentiment benefitted the safe-haven USD and contributed to the selling bias.
• Break below 200-hour SMA support now seems to have paved the way for a further intraday weakness.

The NZD/USD pair added to its post-RBNZ losses and dropped to fresh daily lows, around the 0.6430 region during the early European session.

The pair witnessed some selling on Tuesday and extended the previous day’s modest pullback from 1-1/2-week tops in reaction to the Reserve Bank of New Zealand’s (RBNZ) dovish monetary policy statement. As was expected, the RBNZ left interest rates unchanged at a record low level of 0.25% and its QE program steady at N$60 billion.

In the accompanying policy statement, the central bank sounded optimistic over an earlier than expected resumption of the economic activity. However, the RBNZ warned that the continued border closure was exacerbating the negative impact of the virus outbreak and showed readiness to do more to support the economy.

Adding to the dovish sounding statement, the central bank’s remarks on the recent appreciation of the kiwi prompted some fresh selling around the NZD/USD pair. The RBNZ stated that rising exchange rate has put further pressure on export earnings, suggesting that the central bank wants the local currency to be weaker.

This coupled with a slight deterioration in the global risk sentiment, as depicted by a turnaround in the equity markets, underpinned the US dollar’s relative safe-haven assets. This, in turn, further collaborated towards driving flows away from perceived riskier currencies and contributed to the NZD/USD pair intraday pullback.

Meanwhile, the latest leg of a sudden fall over the past hour or so could further be attributed to some technical selling below the 200-hour SMA, around mid-0.6400s. Hence, some follow-through weakness towards challenging the 0.6400 mark, en-route weekly lows around the 0.6380 region, now looks a distinct possibility.

Technical levels to watch