NZD/USD drops below 0.78 as RBNZ signals end of

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NZD/USD fell over 200 pips peak to trough on a one-two punch from both central banks: a relatively hawkish Federal Reserve and perhaps the end of the tightening cycle in New Zealand send the pair down the shaft.

What’s next for kiwi/dollar?

The Federal Reserve not only ended its third QE program, but also offered a hawkish view of the labor market. In addition, Yellen and her colleagues did not seem worried about inflation. If reading between the lines of the wording seems complicated, the fact that we had a dovish dissenter when usually the dissenters are hawkish is very telling.

Two hours later, the Reserve Bank of New Zealand made its decision. as expected, Wheeler and his colleagues left the Official Cash Rate at 3.50%. They hiked it four times and then signaled a pause.

This now looks like more than a pause: the RBNZ removed its reference to further tightening. That reference was tied to inflation, but inflation in New Zealand has certainly fallen.

In addition, the RBNZ hit the kiwi when it was already down, and not for the first time: the statement not only said that the levels of NZD are unsustainable and unjustifiable, but also said it expects to see “a further significant fall for the New Zealand dollar”.

Indeed, this fall is materializing: NZD/USD is below 0.78, after already getting close to 0.80 early in the day. The low so far is 0.7767. The bearish calls were spot on.

The pair is at the lower end of the range, back to levels last seen when the New Zealand government and the central bank made statements about the strength of the kiwi. The Prime Minister would like to see it at 0.65.

For more, see the NZDUSD forecast. Here is the chart, showing the collapse:

AUDUSD falls sharply after erasing gains as Federal Reserve ends QE3 October 2014

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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