NZDUSD breaks lower

The NZDUSD is continuing its move to the downside after yesterday's sharp move lower after the RBNZ "dovish hike".

Yesterday the Reserve Bank of New Zealand (RBNZ)signaled the end of its rate-hiking cycle, after raising rates by 25 basis points to a 14-year high of 5.5%. However, the decision, which was interpreted as "dovish" by the market and analysts, put the kibosh on expectations of further hikes and led to a drop of over 2.16% drop in NZDUSD yesterday. The RBNZ is now forecasting that the official cash rate (OCR) will remain at this restrictive level until at least mid-2024 to ensure inflation returns to the targeted 1-3% range.

Today, the pair is down another 1% on the day and trading at the lowest level since November 11, 2022.

Looking at the daily chart above, the price has also moved below a swing area between 0.60559 and 0.60844 (see red numbered circles and yellow area on the chart above). The swing area goes back to July 2022.

In November 2022, the price based against that swing area (see red numbered circles 4, 5 and 6) before moving to the February 2023 high.

Since February, the price has seen a step lower which formed a new ceiling between 0.6363 and 0.6389 (see green numbered circles on the chart above). The price moved up and down since February with a low near 0.60844 and the highs near 0.6389. The last 2 days has seen an acceleration to the downside and outside of the consolidation range seen since February (see red box in the chart above).

The pair is breaking lower. Sellers are taking more control

The next key target comes against the 50% midpoint of the move up from the 2022 low at 0.60242. Move below that level opens the door for further downside momentum.

Close risk will now be 0.60559 with additional risk at 0.60844. Sellers looking for more downside momentum on the break of the consolidation range, would not want the price to move back above the low swing area (red numbered circles).