The New Zealand dollar slumped against the greenback during last weeks trading session after the Reserve Bank of New Zealand opened the door to a possible rate cut following its monthly policy meeting on Wednesday. The RBNZ held its benchmark interest rate at a record-low 3.50% and signaled that it is prepared to lower borrowing costs further as plunging oil prices dampen inflation.
“Future interest-rate adjustments, either up or down, will depend on the emerging flow of economic data,” RBNZ Governor Graeme Wheeler commented.
Meanwhile, the dollar had strengthened broadly on late Wednesday’s trading session after the Federal Reserve indicated that interest rates could start to rise around mid-year. Following its policy meeting on Wednesday, the Fed said it would keep rates on hold at least until June and reiterated its pledge to be patient on raising interest rates, while acknowledging the solid economic recovery and strong growth in the labor market.
Weekly bias remains on the downside as 21 and 55 EMA’s are crossed southward. Also SSRC, MACD and RSI oscialltor momentum indicator is signalling more selling off is expected in the pair. A break of 0.72141 (January 30 Low) will resume further fall to 0.71200 psychological as price is currently trading inside a demand zone, so caution is advised as the bulls might be anticipating for price rejection of this zone to reverse the bearish trend as the current market slightly appears to be oversold.
In the week ahead, investors will be turning their attention to Friday’s U.S. nonfarm payrolls report for further indications on the strength of the recovery in the labor market.
New Zealand employment data due on Tuesday will also be in focus.