NZDUSD
NZDUSD is the biggest loser among the majors in today’s Asian session after the RBNZ doubled the size of its QE program. As of this writing, the currency pair is down by 1.04% from its opening price, trading at 0.6013.
While the central bank kept interest rates unchanged at 0.25%, policymakers increased its Large Scale Asset Purchase Program (LSAP). Previously, it was capped at $33 billion. In today’s meeting, it was widened to $60 billion which will be used to purchase government bonds, local funding agency bonds, and inflation-indexed bonds. According to the RBNZ, the reason for this move is to decrease borrowing costs as soon as possible to encourage lending.
Central bankers also do not seem optimistic about economic conditions despite the government lowering its alert level to 3 amid the pandemic. They warned that risks remained to the downside and are bracing for a 21.8% contraction in growth for 2020. The RBNZ also warned that they are prepared to cut rates if needed in order to hit its employment and inflation targets.
Download our Q2 Market Global Market Outlook
On the 4-hour time frame, it can be seen that NZDUSD is testing a confluence of support around 0.6025. This price coincides nicely with the rising trendline from connecting the lows of April 22 and May 7. It also aligns nicely with the 200 SMA. Reversal candlesticks around this area could mean that the currency pair may soon retest its May 11 highs at 0.6145.
On the other hand, a strong close below the 200 SMA at 0.6017 could mean that sellers are dominating trading. NZDUSD could head lower to its May 7 low at 0.5993 or maybe even to 0.5925 where it bottomed on April 23.