New Zealand Dollar (NZD) extends decline on dovish RBNZ

• The New Zealand Dollar weakens in Thursday’s early Asian session. 
• RBNZ’s dovish stance continues to undermine the Kiwi. 
• Investors await the US data for fresh impetus, including Retail Sales, Initial Jobless Claims and Philly Fed Manufacturing Index.

The New Zealand Dollar (NZD) remains on the defensive on Thursday. The dovish stance of the Reserve Bank of New Zealand (RBNZ) after a surprise rate cut on Wednesday has exerted selling pressure on the Kiwi as the easing cycle came much sooner than expected.

Nonetheless, further confirmation of the downward path of US inflation has triggered the expectation of a Federal Reserve (Fed) interest rate cut in September. This, in turn, might drag the US Dollar (USD) lower and cap the downside for NZD/USD. Later on Thursday, traders will keep an eye on US Retail Sales, weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Industrial Production.  

Daily Digest Market Movers: New Zealand Dollar remains vulnerable after the RBNZ’s dovish move

• RBNZ Governor Adrian Orr said early Thursday that the central bank is maintaining a suitably restrictive policy stance and is likely looking at gauging when to enact future rate reductions.
• RBNZ board members decided to cut its Official Cash Rate (OCR) by 25 basis points (bps) from 5.50% to 5.25%. The market participants expected a rates-on-hold decision. 
• Board members agreed that policy will need to remain restrictive for some time to ensure that domestic inflationary pressures continue to decline, according to the minutes of the RBNZ interest rate meeting. 
• During the press conference, RBNZ’s Orr said that he is confident inflation back in its target band can commence re-normalising rates. Orr further stated that the central bank considered a range of moves; the consensus was for 25 bps. 
• The US headline Consumer Price Index (CPI) increased 2.9% YoY in July, compared to a rise of 3% in June, below the market consensus. The Core CPI climbed 3.2% YoY following a rise of 3.3% seen in July, in line with the market forecast.

Technical Analysis: New Zealand Dollar maintains a negative outlook

The New Zealand Dollar trades in negative territory on the day. The bearish outlook of the NZD/USD pair remains intact as the pair faces rejection around the key 100-day Exponential Moving Average (EMA) and the descending trendline around 0.6050 on the daily chart. The 14-day Relative Strength Index (RSI) points lower below the 50-midline, suggesting lingering bearish pressure.

The crucial resistance level for NZD/USD appears at 0.6050, the key 100-day EMA and the descending trendline. If the price manages to break above this level, it would indicate the possibility of further upside to 0.6077, the upper boundary of the Bollinger Band. Further north, the next barrier emerges at 0.6154, the high of July 8. 

On the downside, a breach of the 0.6000 psychological level would see a drop to 0.5930, a low of August 2. Extended losses will see the next contention level around 0.5857, the lower limit of the Bollinger Band and a low of July 29.