New Zealand Dollar: Dovish RBNZ Expectations to Mark Fresh YTD Lows

Fundamental Analysis

The long-term trend for the New Zealand dollar remains bearish as the Greenback roars after Donald Trump was elected as President of the US. Moreover, the recent tariff threats from Trump’s team have strengthened the US dollar across the board.

Speculations about a potential 10% tariff on Chinese goods have substantially weakened the Kiwi as China has been the largest trading partner of New Zealand. Since Trump’s last term was quite aggressive regarding trade policies, the markets have started pricing in the US policy shift which has significantly impacted the investor sentiment.

The coming up Reserve Bank of New Zealand (RBNZ) meeting may trigger volatility. Market participants expect a 50-bps cut to 4.25%. The anticipated rate cut aligns with the central bank’s dovish stance from the last month. Hence, the NZD may stay under strong bearish pressure.

On the other hand, the FOMC meeting minutes will be released overnight. The hints to cut the rates in the December meeting may lend some support to the NZD/USD. However, hints for a delayed rate cut could further strengthen the Greenback.

Technical Analysis

The daily chart shows a strong reversal candle as the price found some interim support after falling slightly below the 0.5800 level. The pair appears to be in a positive zone on the lower timeframes. However, the price has already broken the 0.5850 support. Staying below the level may gather more selling momentum to test the 0.5800 area ahead of 0.5770.

The moving averages on the daily chart lie well above the current price which shows the bearish momentum remains well established and more downside may be seen. Also, the 50-day and 100-day moving averages have formed a bearish crossover which further exacerbates the selling bias.

The RSI value lies at 35.0 which shows the price has got out of the oversold conditions. However, the bullish momentum is far from being confirmed.

On the 4-hour chart, the corrective upside found a rejection around the 50-period SMA. The price has slowly retreated towards the 20-period SMA. Closing below the 20-SMA could mean another selling signal for the traders. The RSI value is at 48.0 which is close to the buying zone. However, the price action does not confirm the upside bias yet.

The price seems to be in a pause mode as it awaits some market catalyst to stir momentum on the either side.

Key Levels

Here are the key technical levels to bear in mind while trading the NZD/USD pair:

Key Support Levels

Support 1: 0.5800 (Round figure and a swing low)

Support 2: 0.5770 (Previous month low)

Support 3: 0.5730 (Horizontal level)

Key Resistance Levels

Resistance 1: 0.5850 (Support turned resistance)

Resistance 2: 0.5920 (Swing high)

Resistance 3: 0.5960 (Orderblock)

Final Thoughts

The NZD/USD stays within a strong downtrend. The corrective upside looks feeble and is prone to continue the bearish momentum. The upcoming RBNZ meeting may ignite the bears further as 50-bps rate is widely expected.

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