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Does the kiwi drop today have legs to run further?

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NZD/USD is set for a tenth consecutive daily decline today


Since peaking near the 0.6800 handle towards the end of July, the pair has posted – including today – 13 out of 14 daily declines and the RBNZ decision earlier makes it tough to see any respite in the near-term.
Despite the sharp drop in the kiwi today, markets are not looking to catch the falling knife just yet. As the RBNZ signals that they aren’t afraid to pursue negative rates, it can be taken as a sign that there will be more easing to follow despite the aggressive move today.
As it stands, markets are penciling the next rate cut for November but should US-China trade relations continue to blow up between now and the central bank’s 25 September meeting, expect odds of that to lean towards next month’s meeting.
Currently, markets only see a ~24% probability of the RBNZ acting in September.
Regardless, with the central bank being the most proactive among the majors, it suggests that the kiwi may experience more pain still as other central banks lag behind the RBNZ in introducing more easing policy and stimulus.
For NZD/USD, the low today hit 0.6377 and tested the 15 January 2016 low of 0.6381 before hovering just above 0.6400 now as sellers look to secure a break below key support around 0.6425-30 today.
Considering the sharp fall in the pair over the past few weeks, we may be due for a retracement of some sort in the near-term. That said, the path of least resistance remains for a weaker kiwi considering the circumstances above. The RBNZ will make sure of it.
In the event of a further move lower, watch out for the 2016 low @ 0.6348. If that gives way, the run to the downside will gather legs towards a possible test of 0.6000.

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