NZDUSD Tumbles below the 60 Level

Before the market opened on Monday morning, the Royal Bank of New Zealand cut rates by 75bps to 0.25%.  The central bank said they would also suspend new capital requirements for at least a year and that they would provide more stimulus as necessary in the form on asset purchases rather and negative interest rates.  Today, New Zealand announced a NZD$12 billion stimulus package, which is 4% of GDP!  This is a larger proportion of GDP than neighboring countries, such as Australia. 

As a result, NZD/USD continued to move lower, breaking convincingly below the .6000 level after briefly trading there yesterday ,with today’s low at .5932.  On a daily timeframe, the 161.8% Fibonacci extension from the October 1^st, 2019 lows to the December 31^st highs is 65 pips below todays lows near .5863.  If price trades back above .6000, the next big resistance level is .6193.  The RSI is oversold, so price may get a bounce.

Source:  Tradingview, City Index

On a 240-minute timeframe, NZD/USD has been trading lower since March 9^th in an orderly channel formation.  However, if you create a trendline from the spike low on March 9^th (which I am not a big fan of, as you don’t know where the actual low is) to today’s lows, price is forming a falling wedge with the RSI diverging.  This also indicates that there may be a bounce soon. Even so, price can bounce within the channel. Above the channel trendline,  resistance is at .6000, and then not until .6193 (as mentioned above). 

Source:  Tradingview, City Index

The move lower in NZD/USD which has also been helped by the insatiable bid the US Dollar.  The US Dollar has been in strong demand overnight as it has become the “Flight to Safety”.  The DXY is up over 1.3% today and is nearing the highs from mid-February at 99.91.   The RSI is still within the neutral area, so there is still room for it to move higher.  However, given that price has moved from near 94.75 to 99.50 in only 6 trading sessions, there is always the possibility for a pullback to support near 98.75.  This would allow for NZD/USD to have a corrective bounce in the short-term.

Source:  Tradingview, City Index

Although NZD/USD is moving lower, it may be ready for a short-term bounce.  Keep an eye on the DXY for a pullback, which would allow for the NZD/USD to correct in the short-term.