Here’s Why the NZDUSD fell after the RBNZ interest rate decision


The NZDUSD pair declined after the dovish interest rate decision by the Reserve Bank of New Zealand (RBNZ).

In its interest rate decision, the bank followed the footsteps of other central banks like the Federal Reserve, Bank of England, and European Central Bank (ECB). It left rates unchanged at the ultralow level of 0.25% as most analysts were expecting. The Adrian Orr-led bank also added its limit for the quantitative program to $100 billion. It has so far bought assets worth more than $23 billion or 23% of the outstanding supply.

In addition to this, the bank pledged to do “whatever it takes” to support the economy. Among the tools in its toolbox include negative interest rates, purchases of foreign assets, funding for lending program, and expanded QE program.

These tools remain in place because of the risks facing the economy. While the country has almost eradicated the coronavirus illness, more challenges remain. For example, tourism numbers are at historic lows while many companies are going through challenges in the international market.

At the same time, like in Australia, there is a risk of a second outbreak in the country. Indeed, the country confirmed the first coronavirus case in three months yesterday. The monetary policy statement said:

“Reflecting a possible need for further monetary stimulus, the Committee also agreed that a package of additional monetary instruments must remain in active preparation. The deployment of such tools will depend on the outlook for inflation and employment.”

NZDUSD technical outlook

The daily chart below shows that the NZDUSD pair has been in a strong upward trend in recent days. The pair is trading at 0.6540, which is the lowest level it has been since July 20. Also, the pair has been in the red in the past four consecutive days. The price is slightly above the 50-day and 100-day exponential moving averages.

But it seems to be attempting to cross the 50-day EMA. The NZDUSD pair has also formed a triple top pattern that is shown in pink. Therefore, the price is likely to continue falling as bears target the next resistance support at 0.6500.

On the other hand, a move above 0.6600 will invalidate this trend. This price is an important psychological level.

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NZDUSD forecast


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