November 26, 2024 at 05:11PM
The Reserve Bank of New Zealand (RBNZ) is set to announce its interest rate decision in the upcoming trading session, with expectations leaning toward a 50 basis point rate cut, lowering the benchmark rate from 4.75% to 4.25%. The NZD/USD pair has been in a steady downtrend since late September, driven by expectations of further rate cuts in New Zealand and a robust U.S. economic outlook. This sell-off has pushed the pair below a key swing area that has defined much of its trading range since early 2023.
Historically, the NZD/USD has fluctuated between 0.5848 and 0.6400, with brief breaks outside this range, notably in October 2023. Starting in November 2023, the 0.5848–0.5859 range became a critical support zone, which held firm through several tests in April, July, and August 2024. Although the pair dipped below this zone earlier in November, the price rebounded quickly, signaling hesitation among sellers. However, today’s trading has seen increased downside momentum, with the pair now trading at 0.5822, firmly below this key support. Sellers are clearly in control heading into the rate decision.
What Could Reverse the Bearish Bias?
For a bullish turnaround, a “buy the news” reaction would likely be required, given the high market consensus for a 50 basis point cut. This could occur if the price tests the 2023 low at 0.5772, finds strong buyer support, and then rallies back above the 0.5848–0.5859 swing area. Breaking above 0.5859 would be a critical first step for buyers, with the following key resistance levels:
0.5889: The 38.2% retracement of the November decline.
0.5911: The 100-bar moving average on the 4-hour chart.
0.5917: The 50% midpoint of the November range, which is likely to act as a stalling point.
Downside Risks
If today’s low or the 2023 low at 0.5772 is breached, sellers could target the next major support at 0.5741, the swing low from early November 2022. A break below this level would likely trigger further downside momentum, opening the door to deeper losses.
Heading into the RBNZ decision, sellers hold the upper hand. However, key levels on both the upside (0.5848–0.5859) and downside (0.5772 and 0.5741) will determine the next directional move.
This article was written by Greg Michalowski at www.forexlive.com.
