New Zealand Dollar extends its losses on dovish RBNZ

• The New Zealand Dollar trades on a weaker note in Friday’s early Asian session.
• RBNZ cut its rate for the first time since March 2020 and flags more cuts ahead, dragging the Kiwi lower.
• Investors await RBNZ Governor Orr's speech ahead of the US economic data on Friday.

The New Zealand Dollar (NZD) loses traction on Friday despite the consolidation of the Greenback. The Kiwi has traded in negative territory for the third consecutive day, pressured by a surprise rate cut by the Reserve Bank of New Zealand (RBNZ) and its dovish stance. Furthermore, the cautious mood amid the elevated geopolitical risks in the Middle East might weigh on riskier assets like the NZD.

On the other hand, the expectation of a Federal Reserve (Fed) interest rate cut in September might undermine the USD and create a tailwind for NZD/USD. The market is now fully priced for a 25 basis points (bps) Fed rate cut in September and nearly 20% priced for a 50 bps cut. Traders will take more cues from the Fed's Austan Goolsbee speech later on Friday. Also, the preliminary US Michigan Consumer Sentiment Index for August, Building Permits and Housing Starts will be released. On the NZD docket, Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr is set to speak.

Daily Digest Market Movers: New Zealand Dollar remains weak on dovish RBNZ

• New Zealand’s Business NZ Performance of Manufacturing Index (PMI) improved to 44.0 in July from the previous reading of 41.1.
• China’s Retail Sales rose by 2.7% YoY in July, compared to 2.0% seen in June, beating market expectations. Industrial Production came in at 5.1% YoY in July versus 5.3% prior, weaker than the estimation of 5.2%.
• The US Retail Sales climbed by 1.0% MoM in July, compared to a decline of 0.2% in June, the US Census Bureau reported on Thursday. This figure surpassed the estimation of a 0.3% increase.
• The Initial Jobless Claims for the week ending August 10 increased by 227K, better than the expectation of 235K and down from the previous week of 234K.
• US Industrial Production came in at -0.6% in July versus 0.3 prior, weaker than the 0.3% expected.
• St. Louis Fed President Alberto Musalem said on Thursday that the time is coming closer for the Fed to consider cutting its interest rate, per Reuters.

Technical Analysis: New Zealand Dollar continues bearish tone

The New Zealand Dollar trades softer on the day. The NZD/USD pair maintains a negative outlook on the daily timeframe as the pair holds below the key 100-day Exponential Moving Average (EMA) and the tested descending trendline. Additionally, the 14-day Relative Strength Index (RSI) points lower below the 50-midline, supporting a continuation of the downtrend.

The significant resistance level to watch is near 0.6050, the key 100-day EMA and the descending trendline. Sustained upside momentum past this level could lift the pair all the way up to 0.6070, the upper boundary of the Bollinger Band. The next hurdle is located at 0.6154, the high of July 8.

On the flip side, the next downside target emerges at 0.5930, the low of August 2. Extended losses could clear the way for a move to 0.5860, the lower limit of the Bollinger Band and the low of July 29.