NZD/USD May See Further Drop

WikiFX News (23Sept.) -The Reserve Bank of New Zealand (RBNZ) will release its interest rate decision on September 23 at 10:00 (GMT+8). NZD/USD has weakened by about 150-pips with the overnight implied volatility recording 15.5%, the highest reading since the August RBNZ meeting.

The RBNZ will neither a make monetary policy statement nor hold a press conference and is expected to keep its benchmark interest rate unchanged at the record-low level with no more stimulus, despite the deep recession in the economy.

RBNZ officials previously never showed any dovishness. Currently, the market of interest rate futures does not price in a rate cut by the RBNZ until April next year. NZD's decline looks mainly driven by traders' risk aversion.

Technically speaking, NZD/USD closed below its 50-day moving average while the bearish MACD crossover also points to mounting downward pressure. The New Zealand dollar could face renewed selling pressure if the RBNZ doubles down on its jawboning efforts. Furthermore, NZD/USD could also hasten the decline if the upcoming release of global PMI data from IHS Markit disappoints markets and fuels risk aversion further.

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Chart: Trend of NZD/USD