The New Zealand dollar is steady in Tuesday trade. Early in the North American session, NZD/USD is trading at 0.6670, up 0.05% on the day. The US dollar started the week with broad gains, and NZD/USD declined by 1.2% on Monday, its worst one-day performance since early August.
RBNZ expected to hold the course
The Reserve Bank of New Zealand will make its rate announcement on Wednesday. The central bank sliced rates in dramatic fashion back in March, when policymakers cut rates from 1.00% to 0.25%, in a concerted effort to stabilize the economy as the Covid-19 pandemic hit the country. The bank has since held rates at 0.25% and no change is expected at the upcoming meeting. Investors will be scrutinizing the rate statement, looking for any hints that policymakers are considering negative rates.
With the Federal Reserve signaling that US rates will remain close to zero until 2023, central banks are taking a closer look at reducing rates, perhaps even below zero. The fact that policymakers are entertaining the possibility of negative rates can quickly dampen sentiment towards a currency. This was evident last week as the British pound weakened after the Bank of England said that negative rates had been a topic of discussion for bank members. If the RBNZ rate statement states that negative rates are on the table, we can expect the New Zealand dollar to respond with losses.
- NZD/USD faces resistance at 0.6747. The next resistance line is at 0.6826
- There is support at 0.6621, followed by a support line at 0.6574
- NZD/USD broke below the 20-day MA early in the week. This is an indication of a downward trend
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