NZD/USD dropped to lowest level since May 2016 with a more dovish outcome from the RBNZ holding rates

NZD/USD has been on the back foot with a stronger greenback of late and yesterday's weak ANZ business confidence sent the bird lower below the 0.6880 key support that was broken at the start of this week. 

• RBNZ leaves interest rate unchanged at 1.75%, direction of next move is equally balanced, up or down

With no accompanying forecasts or Monetary Policy Statement, much attention is being paid to the one-page statement that has been released alongside this decision where the RBNZ has remained a cautionary tone here while inflation shows little consistent signs of life - indeed, the bank has maintained that the next move in interest rates could be either up or down and that “interest rates will be at the exclusionary level for a considerable period of time".

"We are well positioned to manage change in either direction - up or down - as necessary."

The RBNZ explained in the accompanying one-page statement that CPI inflation is likely to increase due to rising fuel prices but consumer prices remain below the target. Inflation is predicted to gradually rise to the 2% target, however, the RBNZ said that there is more spare capacity in the economy than previously anticipated to due to weaker GDP.

Other key remarks from the one-page statement:

• Employment is around its sustainable level.
• consumer price inflation remains below the 2 percent mid-point of our target, necessitating continued supportive monetary policy for some time to come.
• Global economic growth is expected to support demand for our products and services.

NZD/USD levels

NZD/USD Technical Analysis: Kiwi near 2018 lows post RBNZ

Support is located at 0.6740 while resistance is located at 0.6850. 0.6680 comes as next downside target meeting the lows 21st May 2016 weekly stick. On the upside, albeit not favoured, above 0.6850 and then the 50-D SMA at 0.6982 comes 0.7060 guarding space en route to 0.7440 as the January tops on the wide. However, while well below the key 200-month moving average support at 0.6980. Technicals stay bearish. RSIs are biased to the downside longer term, (daily RSI a touch above 30 and oversold territory).