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With a 50 bp cut largely baked in, and assuming the central bank follows through, I expect a knee-jerk sell-off across New Zealand dollar (NZD) pairs. That said, most focus will be on any change in the rate statement’s language, press conference commentary, and any revisions in the updated economic projections.
NZD/USD Vulnerable to the Downside
Price action on the monthly timeframe for the NZD/USD (New Zealand dollar versus the US dollar) came within a stone’s throw of testing long-term support from US$0.5511 this month. Anyone following candlestick patterns may note that the current monthly candle is poised to close by way of a bullish engulfing formation. While monthly support is clear, and the bullish engulfing pattern indicates buyers may want to explore higher terrain, the rebound in October 2022 failing to print a meaningful high may concern long-term bulls. Couple this with the overall long-term trend facing south, and any higher rebound could be short-lived.
This brings me to the daily timeframe’s structure. Friday wrapped up pencilling in a dominant higher high (US$0.5738), reaching levels not seen since December 2024. What I also find interesting is although we have a higher high, this move represents a possible D-leg to an equal AB=CD resistance between a 200% extension ratio of US$0.5804 and horizontal resistance at US$0.5774, along with a 100% projection ratio (the equal AB=CD structure) at US$0.5789 nestled within the zone.
Consequently, although monthly price is testing a support area, my base case is that the path of least resistance remains to the downside for the NZD/USD. Daily resistance between US$0.5804 and US$0.5774, therefore, will be on my watchlist this week.
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