NZD/USD extends losses amid RBNZ’s dovish stance and US-China trade tensions
- NZD/USD weakens for the seventh consecutive day, extending its downtrend amid sustained selling pressure.
- RBNZ’s aggressive rate cut and dovish outlook continue to weigh on the Kiwi amid weak domestic fundamentals.
- Technical setup shows a falling wedge pattern forming, with key support at 0.5682 and resistance near 0.5750.
The New Zealand Dollar (NZD) remains on the defensive against the US Dollar (USD) on Wednesday, extending its losing streak to a seventh consecutive session as investors continue to punish the Kiwi despite a broadly weaker Greenback. The sustained sell-off reflects deepening concerns over New Zealand’s fragile economic outlook following the Reserve Bank of New Zealand’s (RBNZ) aggressive interest rate cut last week and rising expectations of further monetary easing.
At the time of writing, NZD/USD is trading around 0.5716, hovering near a six-month trough, as the currency struggles to find a foothold amid mounting domestic headwinds and persistent bearish momentum. The US Dollar Index (DXY), which measures the Greenback’s performance against a basket of six major peers, is trading around 98.76, down 0.30% on the day.
Elsewhere, rising global uncertainty and escalating trade frictions between the United States (US) and China further weigh on the Kiwi’s performance. New Zealand’s economy is closely tied to China, which absorbs nearly 30% of its total exports, making the country particularly sensitive to shifts in Chinese demand.
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From a technical standpoint, NZD/USD remains in a clear downtrend, marked by a series of lower highs and lower lows. At the same time, the pair appears to be shaping a falling wedge pattern, typically seen as a sign of bearish exhaustion and a potential precursor to a bullish reversal.
The price is currently hovering near the lower boundary of the wedge, which acts as immediate support around the previous day’s low at 0.5682. A decisive break below this area could open the door for further downside toward the April 10 low at 0.5628, and below that, the year’s swing low at 0.5484.
On the upside, initial resistance is seen near 0.5750, a former support level that has now turned into resistance, aligning with the upper boundary of the falling wedge. A sustained move above this zone could signal the start of a corrective rebound, with further upside targets at the 21-day Simple Moving Average (SMA) around 0.5800 and the 50-day SMA near 0.5865.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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