New Zealand Dollar Talking Points
NZD/USD[1] extends the decline following the Reserve Bank of New Zealand (RBNZ) interest rate decision on the back of US Dollar[2] strength, and recent price action indicates a further decline in the exchange rate as it extends the series of lower highs and lows from the start of the month.
NZD/USD Rate Selloff Sends RSI Towards Oversold Territory
NZD[3]/USD[4] has taken out the July low (0.6881) as the RBNZ kept the official cash rate (OCR) at the record-low of 0.25%, and the New Zealand Dollar may continue to depreciate against its US counterpart as a growing number of Federal Reserve officials[5] show a greater willingness to switch gears.
In contrast, the renewed lockdowns across Asia/Pacific may keep the RBNZ on the sidelines as “the need to reinstate COVID-19 containment measures in some regions highlights the serious health and economic risks posed by the virus,” and the central bank may stick to the same script at its next meeting on October 6 as “the Committee remains alert to the supply disruptions that COVID-19 can create.”
Nevertheless, it seems as though it will be a matter of time before the RBNZ normalizes monetary policy as Governor Adrian Orr and Co. acknowledge that “New Zealand economy had rebounded more strongly than most countries,” and the central bank appears to be on track to lift the OCR off of the record-low as “the Committee agreed that their least regrets policy stance is to further reduce the level of monetary stimulus.”
Until then, NZD/USD may continue to give back the advance from the November 2020 low (0.6589) as it out the July low (0.6881), but a further decline in the exchange rate may fuel the
