As today’s NZD/USD chart shows, the pair is trading near a four-month low following a sharp decline. The drop occurred yesterday after the Reserve Bank of New Zealand cut the official cash rate by 25 basis points to a three-year low of 3.0% and indicated that the rate could fall further to 2.55% by May 2026.
According to Trading Economics:
– Analysts now expect at least two additional rate cuts before the end of the year;
– There is a risk of deeper cuts depending on incoming economic data.
New Zealand’s exports are also under pressure, particularly due to the 15% US tariffs that came into effect earlier this month, threatening to undermine the country’s competitiveness in key markets. According to Reuters, Citi analysts expect GDP to contract in the second quarter, raising the risk of a recession in New Zealand.
Technical Analysis of the NZD/USD 4-Hour Chart
NZD/USD price action since early July has formed a downward channel (marked in red), reflecting a bearish outlook. Key observations:
→ Yesterday’s drop was sharp, with a very long candle closing near its lows – a bearish signal;
→ However, the lower boundary of the channel acted as strong support, holding back further pressure.
Looking at the broader context:
→ The B→C recovery reached approximately the 0.618 Fibonacci retracement level after the A→B impulse;
→ The D→E rebound from the channel’s median was modest, signalling weak demand.
Given the strength of the channel’s lower boundary and the oversold condition (as shown by the RSI), bulls have some grounds to expect a potential rebound. In that case, NZD/USD could face resistance from the QL line, which divides the descending channel into two quarters.
Reaching the resistance zone formed by the channel median and the 0.589 level (previously acted as support during the inverse head and shoulders pattern – highlighted with arrows) could be difficult in the near term under current conditions.
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