Shorting USD to NZD Rate at 0.60 After the Dead Cat Bounce Following the 50 bps RBNZ Cut
The volatility in the USD to NZD rate continues, with NZD/USD surging above 0.59 yesterday despite the 50 bps RBNZ rate cut, but it stalled there, while the main trend is still quite bearish.
Buy the Fact Price Action After the 50 bps RBNZ Rate Cut
On Friday, NZD/USD fell below the 0.8550 support level, setting the stage for a potential retest of the 2022 low at 0.7470. Weak economic data continues to weigh on the New Zealand dollar, compounded by a 50 basis point rate cut announced by the Reserve Bank of New Zealand (RBNZ) yesterday. Governor Adrian Orr hinted at the possibility of another rate reduction at the next meeting, reflecting ongoing economic challenges.
Despite this, the NZD/USD pair rebounded nearly one cent higher, driven by profit-taking on the U.S. dollar and month-end market flows. With U.S. markets closed for Thanksgiving today and expected low liquidity tomorrow, the Kiwi benefited from a temporary reprieve.
NZD/USD Chart H4 – The 100 SMA Stopped the Climb
For much of 2024, NZD/USD has traded within a narrow five-cent range, fluctuating between a low of 0.8550 and an upper limit near 0.6370. Last week’s dip below the lower boundary lacks clear follow-through, leaving the bearish momentum uncertain. The pair remains under pressure due to contrasting economic conditions in New Zealand and the United States. However, further downside requires a decisive break through key support levels.
Yesterday’s rally stalled at the 100-period simple moving average (SMA) on the H4 chart, serving as a critical resistance level. A sustained move above this SMA could open the door for additional gains, while a failure to hold above the broken support at 0.5850 might reignite bearish sentiment, giving sellers renewed control and shifting momentum downward. The 100-bar SMA offers traders a clear reference point for managing risks and determining the next directional move.
Key Comments from RBNZ Assistant Governor Silk:
- Economic Recovery: Residential investment, manufacturing, retail trade, and construction sectors in New Zealand are expected to begin recovering in early 2025.
- Geopolitical Risks: Geopolitical uncertainties remain a concern, with potential implications for both inflation and economic growth.
- Monetary Policy: Restrictive policy measures are providing confidence in controlling non-domestic inflation, enabling the RBNZ to consider accelerating its easing cycle.
Key Comments from RBNZ Chief Economist Conway:
- Impact of U.S. Policies: No formal modeling has been done on potential economic effects of any future policies from Donald Trump.
- House Price Outlook: A 6.8% rise in New Zealand house prices is anticipated next year.
- Housing Market Sentiment: While a housing boom is not expected, the market is projected to show signs of increased activity and stability.
ANZ Business Confidence for November
NZD/USD Live Chart
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