- NZD/USD has dropped to three-month lows despite the rate cut by China.
- Technical studies suggest scope for deeper declines toward 0.6322 (Nov. 8 high).
NZD/USD has dropped to 0.6356, the lowest level since Nov. 14, having faced rejection at the descending or bearish 50-hour moving average (MA) 0.6395 about 30 minutes ago.
The Kiwi is being offered despite the rate cut by China. The world’s second-largest economy cut the one-year Loan Prime Rate (LPR) to 4.05% as expected from 4.15%. Meanwhile, the five-year rate has been reduced to 4.75% from 4.8%.
The negative response from the China-sensitive currencies like the NZD and the AUD suggests the markets are reading the rate cut as an acknowledgment of the possibility of a marked coronavirus-led slowdown in the first quarter.
From the technical perspective, the series of lower highs and lower lows seen on the daily chart indicate the path of least resistance is to the lower side. More importantly, technical indicators aren’t reporting oversold conditions, so there is scope for further declines.
The bearish outlook would be invalidated if the spot finds acceptance above 0.6411 (the high of Wednesday’s doji candle). That said, a close above 0.6488 (Feb. 12 high) is needed to invalidate the lower highs setup and put the bulls back into the driver’s seat.