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  • NZD/USD carries weakness after business sentiment gauge dropped to April 2009 levels.
  • Broad USD strength, mixed trade sentiment weakens the Kiwi.
  • RBA rate decision, the US ISM Manufacturing PMI in the spotlight for now.

With the private business sentiment gauge dropping to a multi-year low, NZD/USD extends its weakness forward while taking rounds to 0.6260 at the start of Tuesday’s Asian session.

The third quarter (Q3) Business Confidence from the New Zealand Institute of Economic Research (NZIER) dropped below prior -34% to the lowest since April 2009 while registering -35% mark. Additionally, the research firm turns downbeat on major economic catalysts as the quarterly report says, “result suggests annual Gross Domestic Product (GDP) growth will ease below 1 percent later this year. Manufacturing sector remains the most pessimistic, continued weakening in both domestic and export demand, continued uncertainty over the trade war between the US and China.”

With this, calls of the underlying pessimism in the New Zealand economy gain market attention, which in turn can push the Reserve Bank of New Zealand (RBNZ) to drop its latest avoidance of using unconventional monetary policy measures.

The Kiwi earlier dropped to the fresh low since September 2015 after the overall US Dollar (USD) strength disappointed the commodity-linked currencies while a lack of positive signals from the US-China trade front added weakness to the Antipodeans. It should also be noted that week-start second-tier data from New Zealand (NZ) failed to please the Kiwi buyers for long.

With no major economic data from NZ, coupled with a week-long Chinese holiday season, investors will now concentrate on monetary policy decision from the largest customer, i.e. Australia. The Reserve Bank of Australia (RBA) is all but certain to offer a 0.25% Cash Rate cut. However, traders are more interested in looking for signals to future such moves. Following that, the US ISM Manufacturing Purchasing Managers’ Index (PMI) for September, expected 50.0 versus 49.1 prior, will gain market attention.

Technical Analysis

NZD/USD is now up for grabbing the falling trend-line since May 2019, 0.6210 now, a break of which could recall 2015 lows nearing 0.6080. Alternatively, immediate trend-line resistance around 0.6310 could limit the pair’s run-up to 21-day simple moving average (SMA) level of 0.6338 now.