NZD/USD struggles at 0.6900, down for the fifth consecutive day amid thin liquidity conditions

content provided with permission by FXStreet

  • NZD/USD extends its losses to five days straight, hovering around 0.6850s.
  • The disappointment of the RBNZ failing to hike 50 basis points spurred a sell-off of the NZD.
  • NZD/USD: A break of an upslope trendline fueled the downward move further, down to 0.6940.

The New Zealand dollar extends its free-fall to five days in a row, down 0.28%, trading at 0.6854 during the day at the time of writing.

In the overnight session, the pair attempted to reclaim the 0.6900 but failed, retreating towards the mid 0.6800s for the fifth consecutive day. On Wednesday, the Reserve Bank of New Zealand (RBNZ) hiked 25 basis points to the Overnight Cash Rate, though it fell short of investors’ expectations. The NZD/USD reaction to the downside seemed like a “buy the rumor, sell the fact” event.

The market sentiment is upbeat on Thursday, so the risk-sensitive NZD should be headed to the upside. However, FOMC last meeting minutes unveiled on Wednesday showed that some Fed policymakers would like to increase the pace of the bond taper so that the US central bank could have room to maneuver, in the case of inflation running hot. That, alongside thin liquidity conditions in the FX market, due to the observance of the US Thanksgiving holidays, capped the NZD upside move.

Also, the greenback is trading barely down during the day, with the US Dollar Index losing 0.08%, sitting at 96.76.

On Friday, an absent economic docket from New Zealand and the US would let NZD/USD traders leaning on the greenback dynamics and market sentiment, which could offer some fresh impetus on the NZD/USD pair.

NZD/USD Price Forecast: Technical outlook

Wednesday’s price action, witnessing the NZD/USD pair breaking an upslope trendline around 0.6932, which once broken, accelerated the downtrend towards 0.6850s until printing a close at 0.6870. The NZD/USD is tilted to the downside, as depicted by the daily moving averages (DMA’s) remain above the spot price, with a downslope, confirming the bearish bias.

In the outcome of the NZD/USD extending its free fall, the first support would be the September 28 swing low at 0.6859. A daily close below the latter would expose the August 20 cycle low at 0.6805.

On the other hand, the psychological 0.6900 figure would be the first resistance on the way north. A breach of that level would expose 0.6932.