NZD/USD has been declining for the third day in a row, influenced by caution ahead of the RBNZ interest rate announcement. The pair is currently trading around 0.6005, down by 0.90% today, driven by worries over possible US tariff threats. The Reserve Bank of New Zealand is expected to keep the Official Cash Rate (OCR) steady at 3.25%. This comes after six rate cuts since August 2024. Most economists think rates will remain stable, but some anticipate potential cuts later due to the impact of US tariffs.

Technical Overview and Market Sentiments

The Reserve Bank faces the challenge of controlling inflation within a target range of 1–3% while dealing with a slowing economy. The NZD is vulnerable to global issues, especially ongoing US-China trade tensions and declining demand from China. From a technical perspective, NZD/USD is forming a bullish flag pattern, indicating potential upward movement if the support holds. The 50-day EMA at 0.5983 is a key support level. Indicators like RSI and MACD show caution, suggesting a possible weakening in momentum. If the pair breaks below 0.5980, it may lead to a downward shift, aiming for support at 0.5900. The upcoming RBNZ decision is crucial, affecting NZD’s value significantly. As NZD/USD continues to fall for the third session, uncertainty around the RBNZ’s decision and heightened trade tensions are putting pressure on the pair. The current drop of about 0.90% brings it around 0.6005, highlighting how fears about potential US tariffs influence currency movements.

Potential Outcomes and Market Reactions

Markets seem to mostly agree that the Reserve Bank will keep the Official Cash Rate at 3.25%. This follows a series of rate cuts, and while more cuts are possible in the future, they are unlikely at this time. If US tariff discussions escalate or demand from China decreases further later this year, we might hear more dovish comments. The current stance reflects the trade-off the bank faces between easing pressure on households and businesses and maintaining its 1–3% inflation target. Wheeler’s RBNZ is navigating a challenging environment. Slower growth in China and unresolved US-China trade discussions contribute to a cautious outlook for the kiwi. Lower Chinese import demand adds pressure on a currency closely linked to commodity exports. Technically, the current price action suggests caution. The price is moving within what appears to be a bullish flag—generally a sign of potential recovery—but confidence is low. The 50-day EMA near 0.5983 has been a respected level this week. A strong move below this level could shift sentiment significantly, especially given the negative divergence in MACD and weakness in the RSI. If it falls below 0.5980, the focus will shift lower to 0.5900, which is the next important technical level to watch. We believe that a strong close under the EMA requires tighter risk management. We’re observing whether the bullish flag can maintain its support. Signs of fading upward momentum warrant careful monitoring of any significant moves. Going forward, the critical issue is how the central bank’s tone aligns with future economic conditions. While the rate policy may remain unchanged for now, it is highly sensitive to external factors. Any comments about labor market strength or lower growth forecasts could influence market direction. Traders should focus on the language of the RBNZ’s statements and any changes to inflation forecasts, rather than reacting solely to the headlines. Given the mixed performance of risk assets, there is high sensitivity to broader dollar sentiment. Changes in the US dollar related to tariffs or inflation reports could quickly shift market direction. Despite some technical signals, there’s no strong incentive to make aggressive moves until more clarity emerges after the announcement. We view the 0.5980 level as a pivot point until clear trends appear. Movements around this level might be more noise than signals. Monitoring implied volatility leading up to the announcement could also guide potential trading opportunities. Create your live VT Markets account and start trading now.

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