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RBNZ Rate Cut Sends NZD/USD to a 4.5-Year Low

The NZD/USD was rallying ahead of the RBNZ meeting. The market was scaling back expectations of a rate cut. However, after the RBZN finally announced a rate cut during the start of the 6/11 session, bears took over. The RBNZ lowered the official cash rate from 3.50% to 3.25%, the first rate cut in 4-years. Remember that last year the RBNZ had raised rates from 2.50% to 3.50%. 

In any case, we can see that the NZD/USD stopped the preceding rally at 0.7231 and faded the market sharply into new lows on the year. 

NZD/U:SD 4H Chart 6/11

(click to enlarge)

Despite a broken falling trendline and price pushing above the 50-period SMA, the bearish reaction kept the prevailing downtrend intact. Price is now back below the 50-period SMA, and the RSI has held under 60 for the most part, reflecting the maintenance of bearish momentum. 

In the monthly chart, we can see that NZD/USD has broken below the 2011 low and is now at prices not seen in 4.5 years, during the summer of 2010. 

NZD/USD Monthly Chart 6/11
(click to enlarge)

If the RBNZ has the door open for another rate cut while the FOMC is still looking to raise rates this year, the NZD/USD has downside risk first to 0.6807 and then 0.6560. 

In the very short-term, the 0.70 psychological level might provide some support. But unless the FOMC delays the rate hike further into 2016, a pullback should not climb back above the 0.7250 area.