- NZD/USD sees further declines as gentle inflation in New Zealand has left the RBNZ dovish.
- The US dollar refreshes its highest level in two months amid expectations of the Fed gradually reducing interest rates.
- NZD/USD falls below the 200-day EMA.
The NZD/USD pair found some buying interest after posting a up-to-date, almost two-month low near 0.6040 on Wednesday. The short-term outlook for the Kiwi pair remains uncertain due to an expected slowdown in the New Zealand (NZ) Consumer Price Index (CPI) for Q3.
Annualized CPI rose 2.2% as expected, slower than 3.3% in the same quarter last year. Quarter-on-quarter inflation rose at a slower rate of 0.6% from estimates of 0.7%, but the pace was higher than 0.4% in the second quarter.
Soft inflation data has raised expectations that the Reserve Bank of New Zealand (RBNZ) may cut the official lending rate (OCR) by a greater than usual 50 basis points (bps) for the second consecutive year.
Meanwhile, the US dollar (USD) hit a up-to-date two-month high as investors priced in expectations that the Federal Reserve (Fed) would continue to cut interest rates significantly in November. According to CME’s FedWatch tool, the Fed will cut its key interest rates by 25 basis points at each of its two remaining meetings this year.
NZD/USD is weakening after breaking below the horizontal support drawn from the 9/11 low at 0.6100 on the daily time frame. The overall trend of the Kiwi pair has turned bearish as it has formed a swing low. The asset is also trading below its 200-day exponential moving average (EMA), which is around 0.6100.
The 14-day relative strength index (RSI) is falling below 40.00, which suggests that a downtrend has started.
Further declines towards the psychological support at 0.6000 and the August 15 low at 0.5974 are more likely.
On the other hand, a reversal move above the October 8 high of 0.6146 will push the asset towards the 50-day EMA at 0.6173 and the October 4 high near 0.6220.
