NZD/USD drops to 1-month low, tests 200-day SMA support near 0.6100

• NZD/USD falls for a sixth straight day in reaction to China’s not-so-optimistic economic outlook.
• A modest decline in the USD could support the pair, although bets on a 50bps RBNZ rate favor the bears.
• Declining odds for aggressive Fed easing limits USD slippage and validates downside bias for the pair.

The NZD/USD pair is attracting some sellers following a rally in the Asian session towards the 0.6145 region and is moving into negative territory for the sixth consecutive day on Tuesday. Spot prices fall to a one-month low in the last hour, with bears waiting for a sustained break below the technically significant 200-day simple moving average (SMA) around 0.6100 before placing bets us.

The National Development and Reform Commission (NDRC), China’s state planner, said on Tuesday that downward pressure on China’s economy is increasing. This offsets recent optimism led by China’s stimulus bonanza and is proving to be a key factor behind the latest leg of a sharp decline witnessed in the last hour. Apart from this, expectations for a jumbo interest rate cut by the Reserve Bank of New Zealand (RBNZ) are contributing to the tone around the NZD/USD pair.

The US dollar (USD), on the other hand, remains on the defensive below a seven-week peak hit on Friday, although it has not seen any significant selling amid diminishing chances for a more aggressive policy easing by the Federal Reserve (Fed). Furthermore, escalating geopolitical tensions in the Middle East could continue to provide support for the haven dollar and drive away flows from risk-sensitive Kiwis, suggesting the path of least resistance for the NZD/USD pair remains to the downside.