The NZD/USD currency pair is showing signs of continued weakness, trading around 0.5830 during Asian hours on Wednesday, following the Reserve Bank of New Zealand (RBNZ) decision to cut interest rates by 25 basis points, lowering the Official Cash Rate (OCR) to 3%, in line with market expectations.
This move has contributed to a bearish tone in the forex market, as traders digest the implications of a more accommodative monetary policy. Broker Felix Brendel at Highmont Group gives readers a clear, step-by-step understanding of this topic.
From a technical analysis perspective, the NZD/USD remains positioned within a descending channel pattern on the daily chart, indicating a persistent bearish bias. The pair has now extended its three-day losing streak, reflecting weaker short-term momentum and limited upside potential in the immediate term.
The nine-day Exponential Moving Average (EMA), currently at 0.5908, is serving as a key resistance level, with NZD/USD staying below it. Short-term price momentum remains weak, while the 14-day Relative Strength Index (RSI) is positioned under 50, reinforcing the prevailing bearish trend.
Together, the resistance from the EMA and the subdued momentum indicate that the pair continues to face significant downside risk.
Immediate Support and Downside Targets
On the downside, the NZD/USD may initially test support near the lower boundary of the descending channel, located around 0.5770. A decisive break below this level could reinforce the bearish bias and accelerate selling pressure toward the next key support at 0.5485, which represents the lowest level recorded since March 2020.
Traders should monitor the volume accompanying any decline, as higher trading activity near these levels could signal stronger market conviction.
Additional technical indicators further support the bearish outlook. The pair’s movement below the nine-day EMA highlights short-term weakness, while the descending channel framework provides a clear visualization of trend direction.
A break below the channel’s lower boundary would not only indicate a continuation of the current downtrend but also suggest that market sentiment is favoring risk-off positioning in the NZD/USD.
Resistance Levels and Upside Scenarios
In the event of a short-term rebound, the NZD/USD may face resistance at the nine-day EMA (0.5908). Above this level, the 50-day EMA, currently at 0.5953, and the upper boundary of the descending channel near 0.5980, could form a confluence resistance zone.
A sustained break above this area would indicate a potential shift in momentum, supporting a medium-term recovery toward the 10-month high of 0.6121, reached on July 1.
However, considering the current monetary policy stance and short-term technical indicators, the probability of a strong rebound appears limited. The combination of bearish momentum, moving average resistance, and RSI positioning suggests that downside scenarios are more likely to dominate market activity in the coming sessions.
RBNZ Policy Impact on NZD/USD
The 25 basis point cut by the RBNZ aligns with expectations but reinforces a softening tone for the New Zealand dollar. Lower interest rates typically reduce yield attractiveness for the NZD relative to other major currencies, particularly the USD, which has been supported by ongoing Federal Reserve rate policies.
As a result, NZD/USD traders may continue to prefer short positions, reflecting the interest rate differential and broader macro-economic fundamentals.
Momentum and Trend Analysis
Looking at momentum indicators, the 14-day RSI below 50 confirms that short-term strength is lacking. The descending channel framework further emphasizes that NZD/USD remains in a downtrend, with the lower boundary at 0.5770 serving as the first critical support.
A break below this level would likely accelerate the selling trend, potentially targeting historical lows near 0.5485.
Meanwhile, moving averages remain critical reference points for traders. The nine-day EMA at 0.5908 functions as the primary resistance, while the 50-day EMA near 0.5953 reinforces the upper limit of the short-term trading range. Until the pair decisively clears these levels, upside momentum is expected to remain limited.
Conclusion
In summary, the NZD/USD currency pair is demonstrating a bearish technical profile following the RBNZ interest rate cut. The pair is trading under key moving averages, with the descending channel signaling continued downward pressure.
Immediate support lies at 0.5770, with a possible extension toward 0.5485 if the selling persists. On the upside, resistance at the nine-day EMA and 50-day EMA could constrain recovery attempts, while a break above 0.5980 may open the path toward the 10-month high of 0.6121.
Traders should closely monitor technical levels, momentum indicators, and macroeconomic developments, particularly central bank policies, as they remain critical drivers for the NZD/USD price forecast.
