Kiwi Tumbles As RBNZ Rate Cut Speculation Intensifies

Fundamental Analysis

* Kiwi Tumble: The New Zealand dollar is under sustained pressure due to growing expectations of an imminent rate cut by the Reserve Bank of New Zealand (RBNZ). This outlook has been fueled by weaker Consumer Price Index (CPI) inflation figures for New Zealand in the second quarter (Q2). The quarterly CPI inflation rate dropped to 0.4% in Q2 from 0.6% in Q1, while the annual CPI inflation fell to 3.3% year-over-year (YoY) from 4.0% in the previous period. Additionally, unexpected rate cuts by the People’s Bank of China (PBoC) on Monday have added further pressure on the New Zealand Dollar (NZD), as China is New Zealand’s largest trading partner. The PBoC lowered both the one-year and five-year Loan Prime Rates (LPR), which are benchmarks for bank loans, by 10 basis points (bps).

Technical Analysis

* Technical Breakout: NZDUSD was traded lower following prior breakout below the previous support level 0.59850. MACD which illustrate bearish momentum signal suggest the pair to further extend its losses

* Resistance and Support: If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards 0.58750. Conversely, a potential reversal is also to be expected and the price could head towards 0.60900 after it breach back above the level 0.59850.

Potential Risks

Moving ahead, investors will focus on this week, mostly from the U.S due to lack of crucial Japan data, such as US Manufacturing PMI, US GDP and PCE Price Index to gauge further sentiment.

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Monitoring

Stay updated on US and Japan data, central bank updates and any shifts in the US Dollar’s strength by following PU Xtrader’s financial news page.

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