NZD Drops 1% Following Dovish RBNZ Announcement

NZDUSD fell sharply on Wednesday morning, down nearly 1%, pressured by the Reserve Bank of New Zealand’s dovish stance. The central bank kept interest rates steady at 5.5%, as expected, but signaled the possibility of rate cuts if inflation continues to ease as projected.

The fresh decline broke through key technical supports at 0.6100 and 0.6089/80 (daily Tenkan-sen / top of the daily Ichimoku cloud / 38.2% Fibonacci retracement of 0.5851/0.6221), and is now pressuring the pivotal support at 0.6047 (July 2 higher low). A daily close within the cloud would confirm a bearish signal, and a break below 0.6047 would complete a failure swing pattern on the daily chart, paving the way for further declines towards 0.6036/25 (50% retracement / base of the daily cloud). Breaching the thickening daily cloud would further weaken the near-term outlook.

Rising negative momentum on the daily chart, along with the bearish setup of daily Tenkan-sen and Kijun-sen, adds to the negative near-term outlook. Corrective upticks should ideally be capped by the cloud top and not exceed the daily Tenkan-sen, to maintain the bearish trend and provide better selling opportunities.

Res: 0.6089; 0.6100; 0.6134; 0.6153
Sup: 0.6047; 0.6036; 0.6025; 0.6000