NZD/USD slumps to fresh six-week lows ahead of European morning trade
The kiwi is hit the hardest in trading so far today
The drop is an extension of a run to the downside from yesterday, with the dollar running rampant across the board. For now, that mood is staying the course in NZD/USD as the pair falls to its lowest in six weeks.
The low today is now touching 0.6925 and is threatening a breach below the trendline support @ 0.6935. Below that, there isn’t much standing in the way of a potential further retreat towards the end-September lows @ 0.6860.
As things stand, it is tough to argue against dollar sentiment with EUR/USD also lacking any key support levels and USD/JPY threatening a further breakout above 115.00.
But the kiwi itself isn’t doing too well despite the anticipation of a more hawkish RBNZ going into tomorrow’s policy meeting. A 25 bps hike is all but baked in at this point but there is the propensity for the central bank to surprise with a 50 bps hike instead.
That presents some upside risks to the kiwi after a bit of a struggle with AUD/NZD buying upon meeting key technical support in trading this week:
The pattern of lower highs, lower lows is still intact but we are seeing a bit of a challenge to the technical narrative as price starts to work its way towards testing the technical resistance seen @ 1.0417 – one that has helped to define the latest downtrend.
I’d be skeptical of any profound kiwi weakness on the day, at least until we get more clarity from the RBNZ tomorrow. So, keep an eye on the key levels above.
NZD/USD may still be pressured more due to the dollar’s form but AUD/NZD may see gains more limited until we get to the central bank decision tomorrow.