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NZD/USD tests Dec 2019 lows near 0.6420, RBNZ to stand pat next week?

  • Kiwi extends three-day losing streak amid risk-aversion.  
  • RBNZ to hold cash rate next week – Reuters poll.
  • DXY refreshes four-month high above 98.50 ahead of NFP.

The bid tone around the US dollar strengthened in the last hour, exacerbating the pain in the NZD/USD pair, as the bears now look to test the 0.6400 demand area amid broad risk-aversion.

Resurfacing fears over the negative impact of the China coronavirus outbreak on both the Chinese and global economic growth, as the death toll climbs, killed the demand for the risk/ higher-yielding assets across the financial markets so far this Friday. China is New Zealand’s top exports market.

Further, the Kiwi also tracks the steep losses in its OZ neighbor, the Aussie dollar, in the face of the GDP growth forecasts downgrade by the Reserve Bank of Australia (RBA) in its Statement on Monetary Policy (SoMP) released earlier today. Also, the RBA Governor Lowe highlighted that the coronavirus risks to the economy are greater than SARS.

Meanwhile, markets expect the Reserve Bank of New Zealand (RBNZ) to hint further easing when it decides on its monetary policy next week. The dovish RBNZ expectations also somewhat weigh on the spot.

According to the latest RBNZ poll, all 12 economists expected the central bank to hold rates until the end of March, but most predict at least one rate cut before the end of the year. The majority of them also expect New Zealand’s first-quarter gross domestic product (GDP) to be 0.6% lower than previously thought.

Looking ahead, the risk trends combined with the USD price-action will continue to influence the pair ahead of the key US Employment data, due at 1330 GMT. Note that the greenback remains broadly favored recently on the back of upbeat US economic fundamentals and an upbeat US jobs report will only add to the dollar’s upside.  

NZD/USD Technical levels to consider

 

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