Will NZD/USD Extend Losses? Traders Await RBNZ’s Interest Rate

8 Okt

The NZD/USD pair continues its downward trend, turning lower for the sixth straight day as traders react to the less-than-optimistic Chinese economic outlook. As China remains New Zealand's largest trading partner, any signs of economic slowdown in China tend to have a significant impact on the New Zealand Dollar (NZD).

Focus on RBNZ Interest Rate Decision
Looking ahead, the Reserve Bank of New Zealand (RBNZ) is set to announce its interest rate decision following its scheduled policy meeting. If the RBNZ adopts a hawkish stance due to rising inflationary pressures, it is likely to raise the Official Cash Rate (OCR). A rate hike would typically attract more capital inflows, providing support to the NZD. Conversely, if the central bank takes a more dovish approach by lowering the OCR in response to lower inflation, the NZD could weaken further.

The RBNZ’s decision will play a crucial role in determining the short-term direction of NZD/USD. Higher rates generally boost a currency, while lower rates tend to weaken it as investors seek higher returns elsewhere.

Technical Outlook: Bearish Momentum Remains
In our previous forecast, which you can review here:

NZD/USD Slips as Fed Powell Hints at Gradual Rate Cuts, we closed a bearish position from a supply area after successfully capturing downside movement. The current price action suggests another potential bearish impulse, particularly around the 0.60500 level. In a worst-case scenario for the NZD, the price could drop further to 0.58750, another key demand area based on historical support.

However, we view this deeper decline as less likely at the moment, given that market sentiment may shift based on the RBNZ's upcoming decision.

Waiting for a Bullish Setup
Currently, we have no open position on NZD/USD, as we wait for the pair to reach a demand area before considering a potential bullish trade. The demand zone around 0.60500 is a critical level to watch for any signs of reversal, but we remain cautious and are monitoring upcoming economic events closely.

Conclusion
As the NZD/USD pair continues to slide, all eyes are on the RBNZ and its interest rate decision. Traders should remain vigilant, as a hawkish move could trigger a rebound in the New Zealand Dollar, while dovish policies may deepen the pair's decline. For now, we are on the sidelines, awaiting a clearer opportunity to enter the market.


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