The NZD to USD ratio has been trying to break below the 200 daily SMA for several days, but without much success, so NZD/USD continues to consolidate around 0.61. However, this forex pair hasn’t been able to bounce higher despite the USD weakness in recent weeks, which suggests that the New Zealand dollar is also pretty weak and the support will be broken once USD buyers return.

NZD/USD USD Daily Chart – The Price Is Sticking to the 200 SMA Too Long

The NZD turned weaker after failing at the 50 SMA (yellow) on the daily chart early last week and the decline accelerated after the RBNZ decided to end the rate hike cycle, opposite to the market’s expectations. The recent economic indicators from New Zealand have indeed indicated weakness in the economy, providing support for the Reserve Bank of New Zealand’s (RBNZ) decision to pause its interest rate hikes. The RBNZ’s choice to maintain the cash rate at 5.50% increased the selling pressure on the NZD/USD exchange rate.

Market expectations had anticipated another rate hike by the RBNZ, so the central bank’s decision to keep rates steady led to a significant decline in the New Zealand currency against major currencies. This outcome underscores the policy shift from the RBNZ at last, which is shaping the NZD to turn even more bearish. Yesterday RBNZ officials sounded confident that inflation is going the right direction, which means that they will look toward rate cuts now.

Reserve Bank of New Zealand Chief Economist Conway’s remarks indicate several key points:

1. The declines in inflation are seen as positive or encouraging by the central bank. This suggests that the RBNZ may view the easing of inflationary pressures favorably, possibly indicating that it aligns with the bank’s objectives or expectations.
2. Conway suggests that interest rates will need to remain restrictive for a sustained period. This implies that the RBNZ intends to keep interest rates at relatively high levels to address certain economic conditions or policy objectives. This could be aimed at controlling inflation, maintaining financial stability, or achieving other monetary policy goals.

Overall, Conway’s comments provide insight into the RBNZ’s stance on inflation and interest rate policy, offering valuable information for market participants and analysts trying to understand the central bank’s future monetary policy actions.

NZD/USD Live Chart