• NZD/USD recovered some ground on Thursday but the broader outlook remains bearish as traders reassess the Reserve Bank of New Zealand’s rate path following its latest policy decision.
• The RBNZ’s 25-basis-point rate hike was accompanied by signals that the tightening cycle is likely to slow, limiting support for the New Zealand dollar. The central bank also highlighted significant downside risks to economic growth.
• New Zealand’s economic data also added to concerns. The Q2 terms of trade index fell 9.0%, significantly worse than the 3.9% decline expected, while import prices jumped 13.8% quarter-on-quarter. The sharp rise in import costs could add to inflation pressures but also highlights weaker external trade conditions.
•The main market focus is Friday’s U.S. August non-farm payrolls report. Economists polled by Reuters expect 56,000 jobs to have been added, making the report crucial for expectations around Federal Reserve policy.
• Immediate resistance is located at 0.5911(SMA 20), any close above will push the pair towards 0.5932(61.8%fib)
• Support is seen at 0.5837(50%fib) and break below could take the pair towards 0.5809(Lower BB).
Recommendation: Good to sell around 0.5870 with stop loss of 0.5950 and target price of 0.5800
