The New Zealand dollar pulled back against the greenback to retrace the rally from Friday, and the high-yielding currency is likely to face increased selling pressures over the week as the Reserve Bank of New Zealand is expected to lower the overnight lending rate by 50bp to a record-low of 2.50%.
Currency Pair: NZD/USD
Chart: 60 Min Charts
Short-Term Bias: Flat
Analysis
The New Zealand dollar pulled back against the greenback to retrace the rally from Friday, and the high-yielding currency is likely to face increased selling pressures over the week as the Reserve Bank of New Zealand is expected to lower the overnight lending rate by 50bp to a record-low of 2.50%. After reaching a high of 0.6349 in October, the NZD/USD slipped to a low of 0.4894 in March as investors turned risk adverse, and as the OECD calls for the RBNZ to lower the cash rate to 2.00%, expectations for further easing is likely to weigh on the pair over the near term. Over the next few hours of trading, we are likely to see the pair push back below 0.5620-30 (50.0% Fib) to fill-in the gap from the 120 SMA as equity futures foreshadow a lower open for the European and U.S. markets, and may attempt to retrace the advance from the previous week as investors anticipate the RBNZ to ease policy further. Nevertheless, as Governor Alan Bollard remains reluctant to overshoot the interest rate, if the central bank head puts a floor on the interest rate and states that he will maintain a neutral policy stance going forward, long-term expectations could spark demands for the kiwi-dollar, and we may see the pair make another attempt to push above 0.6030-40 (78.6% Fib) over the following month. On the other hand, as the downturn in the global economy intensifies, policymakers in New Zealand may take further steps to shore up the $128B economy, and if Dr. Bollard leaves the door open for lower borrowing costs, the NZD/USD should continue to push lower over the week, and is likely to retrace the rally from March. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
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