Current dynamics

The NZD/USD pair is falling for the second month in a row and is currently trading near yearly lows of 0.5830.

The New Zealand currency is under pressure as investors anticipate significant monetary easing by the Reserve Bank of New Zealand (RBNZ) next week. Inflation slowed to 2.2% in Q3 and was within the target range of 1.0%-3.0%, while the economy contracted by 0.2% in Q2 and was close to recession, which is likely to increase if the new US administration raises trade tariffs on New Zealand goods. Recently, regulator chief Adrian Orr said that high interest rates were putting pressure on business and investment, while inflation was stable, so borrowing costs needed to be lowered to restart growth. Most experts now expect the RBNZ to cut rates by 50 basis points at its November meeting, but a 75 basis point correction is not out of the question.

Unlike their New Zealand counterparts, U.S. Fed officials may suspend their easing cycle in December, although recent comments from the regulator’s board members add to the uncertainty: officials are concerned about the possibility of an acceleration in consumer price growth due to tax cuts and new “trade wars” expected under a Republican administration, but they cannot yet say how significant the acceleration in inflation will be. Last week, Fed Chairman Jerome Powell said that “the economy is not giving any indication that there is a need to hurry to cut interest rates.” In this environment, the likelihood of the regulator moving away from a dovish monetary policy stance in December has increased significantly, strengthening the U.S. currency.

Support and resistance levels

Currently, the price has broken below the level of 0.5859 (Murray [0/8] level), which will open the possibility of strengthening the downward momentum towards the target of 0.5737 (Murray [-2/8] level). If the level of 0.5981 (Murray [2/8] level, 23.6% Fibonacci correction, middle line of Bollinger Bands) is broken upwards, the growth may resume towards the targets of 0.6103 (Murray [4/8] level) and 0.6225 (Murray [6/8] level, 38.2% Fibonacci correction), but this scenario seems less likely.

Technical indicators confirm the continuation of the downtrend in the medium term: Bollinger Bands and Stochastic are directed down, MACD is growing in the negative zone.

Resistance levels: 0.5981, 0.6103, 0.6225.

Support levels: 0.5798, 0.5737.

Trading scenarios

Short positions Yes open from the level of 0.5820 with the target of 0.5737 and stop-loss around 0.5870. Execution time: 5–7 days.

Long positions can be opened above the 0.5981 level with a target of 0.6103, 0.6225 and a stop-loss around 0.5950.