New Zealand dollar Sell-Off: How Much Longer Will It Last?

Key Points:

• The Reserve Bank of New Zealand’s decision to maintain interest rates and dovish forward guidance has led to a significant decline in the NZD/USD.
• Danske Bank forecasts a continued drop in the New Zealand dollar, setting a 12-month target at 0.5700.
• Key technical levels suggest possible support and resistance zones for the Kiwi.

The Reserve Bank of New Zealand (RBNZ) recently decided to maintain interest rates, accompanying this move with dovish remarks and forward guidance. This decision has led to a notable decline in the New Zealand dollar (NZD) over the past two days.

Danske Bank economists foresee a prolonged decline in the NZD/USD currency pair, setting a 12-month target at 0.5700. They suggest that the RBNZ’s approach is notably different from other G10 central banks, which are seemingly on the brink of initiating rate cuts—though such expectations are often being pushed further into the future.

Recent market sentiment has driven a significant drop in the Kiwi, but it appears to be attempting to find support. On the daily chart, the 100 and 200-day simple moving averages present significant obstacles to bearish trends.

On a shorter-term 4-hour chart, the next key support level is at 0.6050, which previously served as resistance in October last year. If the NZD can sustain levels above 0.6070, there might be potential for a positive outlook, with the next resistance target potentially around 0.6140, supported by signals from the Relative Strength Index (RSI).