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The decision of the RBNZ failed NZD

14.08.2017

On Thursday (August 10), the Reserve Bank of New Zealand announced its decision to maintain the current level of interest rates unchanged at 1.75%. Judging by the reaction of the foreign exchange market, such a decision by the regulator greatly upset investors. By the end of the Asian trading session, NZDUSD has already lost more than 90 points, reaching key support at 0.7260 at the moment.

The reason for such aggressive sales were the statements of the officials of the National Library of Russia, voiced by them during the traditional press conference. Deputy Chairman of the Reserve Bank of New Zealand John McDermott explicitly stated the need to reduce the rate of the New Zealand dollar to increase inflation. Moreover, the official directly hinted that the regulator not only has the desire, but also all the opportunities to weaken the exchange rate of the national currency. First of all, we are talking, of course, about intervention.

On such an information background, the pair NZDUSD tested the lower limit of the trading range 0.7260 - 0.7370. In the event of its penetration, we are facing a greater downward movement.

The first resistance to the development of a possible bearish trend is the July low at around 0.7202. If this line is taken, the increasing pressure of sellers will help to reduce the NZDUSD rate up to the May low at 0.6817.

This scenario seems quite realistic if we take into account the words of the RBNZ chairman Wheeler that his entire team fully shares the idea of ​​reducing the cost of lending. It is likely that until the end of 2017, the New Zealand regulator will adhere to a soft monetary policy that will put pressure on a pair of NZDUSD.