- NZD/USD Faces Further Downside as Weak NZ Inflation Fuels Dovish Expectations for the RBNZ.
- The US Dollar Hits a Two-Month High Amid Expectations of Gradual Fed Rate Cuts.
- NZD/USD Falls Below the 200-Day EMA.
The NZD/USD pair has attracted some buying interest after hitting a fresh nearly two-month low near 0.6040 on Wednesday. However, the near-term outlook for the Kiwi remains vulnerable following the deceleration in New Zealand's Q3 Consumer Price Index (CPI).
Annual CPI rose by 2.2%, as expected, but this was slower than the 3.3% recorded in the same quarter last year. Quarter-on-quarter inflation increased at a rate of 0.6%, slightly below the estimate of 0.7%, though it was an improvement from the 0.4% rise in Q2.
The soft inflation data has led to expectations that the Reserve Bank of New Zealand (RBNZ) may implement a larger-than-usual cut of 50 basis points (bps) to its Official Cash Rate (OCR) for the second consecutive time.
Meanwhile, the US Dollar has reached a fresh two-month high, as traders have adjusted their expectations regarding the Federal Reserve’s interest rate decisions. According to the CME FedWatch tool, the Fed is anticipated to cut its key borrowing rates by 25 bps in each of the remaining two meetings this year.
The NZD/USD pair weakened after breaking below the horizontal support established from the September 11 low of 0.6100 on the daily timeframe. The overall trend has turned bearish, forming a lower swing low, with the asset now trading below the 200-day Exponential Moving Average (EMA) around 0.6100.
The 14-day Relative Strength Index (RSI) has slipped below 40.00, indicating a bearish momentum has been triggered.
Further downside appears likely, targeting the psychological support level at 0.6000 and the August 15 low of 0.5974.
Conversely, a reversal above the October 8 high of 0.6146 could propel the pair towards the 50-day EMA at 0.6173 and the October 4 high near 0.6220.
NZD/USD Daily Chart
