NZD/USD falls to three-week lows, below 0.5900 zone after RBNZ inaction

• NZD/USD declines after the RBNZ decided to keep its cash rate target unchanged.
• The dovish monetary policy statement puts some pressure on the Kiwi.
• The dollar remains near multi-month highs and contributes to the intraday decline.

He NZD/USD is on offer after the Reserve Bank of New Zealand (RBNZ) announced its monetary policy decision and cuts for the third consecutive day on Wednesday. Prices fell to a new three-week low below the 0.5900 area in the past hour and look vulnerable to weakening further. He pair has found bottom at 0.5882 and is trading at the time of writing above 0.5885, losing 0.40% on the day.

As expected, the RBNZ decided to maintain its cash rate target at 5.50% and was dovish in its monetary policy statement. The central bank noted that demand growth in the economy continues to moderate and that rising interest rates are reducing inflationary pressure, as required. This, in turn, suggests that the RBNZ may have ended the rate hike cycle and undermined the New Zealand Dollar (NZD), which, along with a bullish US Dollar (USD), puts pressure on the NZD/USD pair. .

In fact, the Dollar Index (DXY), which tracks the dollar against a basket of currencies, remains stable near 10-month highs and remains well supported by the hawkish view of the Federal Reserve (Fed). Investors seem convinced that the US central bank is more likely to tighten monetary policy further and keep interest rates higher for longer. These bets have been reaffirmed by recent comments from several Fed officials, who advocate for at least one more rate hike between now and the end of the year to return inflation to the 2% target.

Furthermore, the latest JOLTS monthly report indicated that there were some 9.61 million unfilled jobs in August, a significant increase from the upwardly revised figure of 8.92 million the previous month. Data suggests wage inflation may be back on the agenda, which could force the Fed to extend the rate-hike cycle into 2024, driving the US 10-year Treasury yield to a new high. maximum of 16 years. This, coupled with a weaker risk tone, further benefits the Dollar’s safe haven status.

The prolonged sell-off in the US bond market and rising US bond yields add to concerns about economic headwinds from rapidly rising borrowing costs. Furthermore, lingering concerns over China’s weakened real estate sector continue to weigh on investor sentiment and weigh on the risk-sensitive Kiwi. With the latest leg lower, the NZD/USD pair appears to have found acceptance below the 0.5900 zone and is likely to extend its recent decline from the mid-0.6000 zone, or a near two-month high set last week .

NZD/USD Technical Levels