NZD/USD: Pressured by forecasts for negative rates in New Zealand

• NZD/USD drops as ABS forecasts negative interest rates in New Zealand. 
• A resurgence of the virus in Auckland forces government to delay elections. 

NZD/USD fell on Monday as some analysts took cues from the Reserve Bank of New Zealand’s (RBNZ) recent dovish statement and forecasted negative rates in New Zealand. 

The pair fell by 0.12% to 0.6530 during the Asian trading hours, after having faced rejection near the 50-day simple moving average (SMA) hurdle of 0.6546. 

The New Zealand-based ABS Bank took note of the dovish policy statement published by the RBNZ last week and rolled out forecasts, projecting 75 basis points cut in the overnight cash rate (OCR) or the benchmark interest rate over the next eight months. Essentially, the bank penciled in an interest rate of -0.5% by early 2021, adding to bearish pressures around the NZD. 

On Aug. 12, the RBNZ published a more dovish than expected monetary policy statement last week and raised its large-scale asset purchase program to $100 billion. The central bank reduced rates to a record low of 0.25% and started purchasing bonds earlier this year to counter the coronavirus-induced financial market turmoil and recession fears. 

New Zealand’s city of Auckland has recently witnessed an outbreak of coronavirus. That forced Prime Minister Jacinda Ardern to delay New Zealand’s election, originally scheduled for Sept. 19, by four weeks. 

Technical levels