Chart of the day - NZDUSD (10.07.2024)

New Zealand dollar is the worst performing major currency today and RBNZ can be named to blame. While the New Zealand's central bank left interest rates unchanged, in-line with market expectations, it has also issued a dovish statement alongside decision. RBNZ said that it expects headline inflation to return to 1-3% target range in the second half of this year. This line has greatly boosted market hopes for a quick launch of the easing cycle in New Zealand. 

Money markets now price in 14 basis points of easing for August meeting as well as 33 basis points of easing for October meeting. This means that markets see an over-50% chance of the first rate cut being delivered as soon as next month. Let us recall that markets saw a 26% chance of August cut before today's meeting. A total of 60 basis points of easing is currently priced in by year's end, suggesting 2 or 3 cuts from RBNZ. Note that there are only 3 RBNZ meetings left in 2024 (August, October and November) so seem to be sure that regardless of whether first cut comes in August or October, it will be followed by subsequent cuts on the next meetings.

Taking a look at NZDUSD chart at H4 interval, we can see that the pair took a sharp turn lower following today's RBNZ policy decision. Pair pulled back fro the 0.6130 resistance zone, marked with 200-period moving average, and slumped below the 50-period moving average and 0.6100 support level. NZDUSD is currently approaching a local low from July 3, 2024 in the 0.6870 area, a break below would pave the way for a move towards the 0.6050 support. Pair may experience some more volatility again this afternoon when Fed Chair Powell appears before US House committee for the second day of his semi-annual testimonies (3:00 pm BST). However, a text of the testimony will remain the same as yesterday, surprises may only come from his answers to lawmakers' questions.

Source: xStation5