New Zealand dollar falls as RBNZ cuts interest rate by 50 bps

• The New Zealand dollar edged lower in the first Asian session on Wednesday.
• The RBNZ cut interest rates by 50bps to 4.75% as expected.
• The September FOMC minutes will be in focus on Wednesday.

The New Zealand dollar (NZD) lost momentum to its lowest level since mid-August on Wednesday. The Reserve Bank of New Zealand (RBNZ) decided to cut the official cash rate (OCR) by 50 basis points (bps) from 5.25% to 4.75% at its October meeting, as expected . The kiwi attracts some sellers in an immediate reaction to the interest rate decision. In addition, Chinese officials are letting traders down without more major incentives. This in turn drags China’s proxy NZD lower against the greenback, as China is an important trading partner for New Zealand.

Going forward, traders will keep an eye on the Federal Open Market Committee (FOMC) Minutes later on Wednesday. On Thursday, attention will turn to US consumer price index (CPI) data for September. If the report shows a weaker-than-expected result, this could affect the USD and help limit the pair’s losses.

Daily Digest Market Movers: NZD remains weak after RBNZ rate decision

• According to the RBNZ’s Monetary Policy Statement (MPS), the committee assesses that annual consumer price inflation is within its inflation target range of 1 to 3%.
• The Committee agreed that it is appropriate to cut the OCR by 50 basis points in order to achieve and maintain low and stable inflation while trying to avoid unnecessary volatility in output, employment, interest rates and exchange rate, the RBNZ MPS noted.
• Federal Reserve (Fed) Vice Chairman Philip Jefferson said on Tuesday that the US central bank’s 50 basis point (bps) interest rate cut in September is aimed at keeping the labor market strong even as inflation continues to fall, according to Reuters.
• Atlanta Fed President Raphael Bostic said on Tuesday that the labor market showed no signs of weakness, adding that despite significant progress in inflation, overall price figures had not yet reached their target level.
• New York Fed President John Williams said he strongly supported a rate cut of 50 basis points (bps) at the last meeting and that the two additional 25 basis point cuts this year were a “fair representation of reasonableness of a base case”, according to Reuters.

Technical Analysis: New Zealand dollar resumes downtrend

The New Zealand dollar is weakening today. The NZD/USD pair continues its downtrend as it crosses below the key 100-day exponential moving average (EMA) and is poised to break below the uptrend channel on the daily chart. Bearish momentum is supported by the 14-day Relative Strength Index (RSI), which is below the median line near 41.10, supporting short-term sellers.

A decisive break below the lower limit of the 0.6135 trend channel could open the way to the psychological 0.6000 level. Sustained trading below this level could lead to a decline towards 0.5974, the August 15 low.

On the other hand, the 100-day EMA at 0.6142 acts as an immediate resistance level for the pair. Extended gains will see a rally to 0.6254, the September 6 high. The additional filter to watch is 0.6300, a round figure, on the way to 0.6365, the upper limit of the trend channel.