As a reaction to the RBNZ interest rate decision, NZD/USD dropped to its lowest level year-to-date before rebounding. The abrupt coronavirus lockdown in New Zealand has forced the country’s central bank to pause on the anticipated rate hike. However, the bank still expects the policy tightening to occur before the end of the year. A hike in interest rates would have placed the country as the first to do so in the Asia-Pacific region and among the G10 currencies.
NZD/USD technical outlook
NZD/USD is on a rebound after the knee-jerk reaction to the RBNZ interest rate decision. Earlier on Wednesday, the currency pair dropped to its lowest level since mid-November 2020 at 0.6868.
Despite the subsequent rebound, it remains below 0.6950, which has been a crucial support level since the beginning of August. On Monday, it hit an intraday high of 0.7045 before plunging. On Tuesday, it entered the oversold territory with an RSI of 22.
At the time of writing, NZD/USD was down by 0.01% at 0.6919. On a two-hour chart, it is trading below the 25 and 50-day exponential moving averages with an RSI of 37. In the near term, I expect the currency pair to find resistance along the 25-day EMA at 0.6953. Subsequently, it may trade within a horizontal channel with 0.6900 being its lower border.
A move below that support level will have the bears retesting Wednesday’s low of 0.6868. On the upside, entry of more buyers may push NZD/USD to 0.6977 along the 50-day EMA before pulling back to below 0.6950.