NZD/USD consolidates dovish RBNZ-led losses, around 0.60 mark
- NZD/USD witnessed some heavy selling pressure after RBNZ signalled about negative interest rates.
- A subdued USD demand helped limit deeper losses ahead of the Fed Chair Jerome Powell’s speech.
The NZD/USD pair now seems to have entered a bearish consolidation phase and was seen oscillating in a range near session lows, around the key 0.6000 psychological mark.
Following the previous day's two-way/directionless trading action, the pair came under some aggressive selling pressure during the Asian session on Wednesday after the Reserve Bank of New Zealand (RBNZ) announced its policy decision.
The RBNZ, as was widely expected, left the Official Cash Rate (OCR) unchanged at a record low of 0.25% and expanded the Large Scale Asset Purchase (LSAP) program potential to N$60 billion, up from the previous N$33 billion.
In the accompanying policy meeting minutes, the committee indicated a possible shift to negative interest rates. The RBNZ predicted a massive 21.8% contraction in June quarter, followed by a 23.8% expansion in the next quarter.
The pair dived nearly 100 pips in reaction to the RBNZ's signal that rates could go below zero. However, a subdued US dollar demand helped limit deeper losses and assisted the pair to find some support near the 0.6000 mark.
The greenback remained on the defensive amid increasing bets over negative Fed interest rates, especially after the US President Donald Trump on Tuesday asked the US central bank to do more policy easing to support the economy.
However, several FOMC members have ruled out the possibility of cutting interest rates below zero. Hence, the key focus will be on the Fed Chair Jerome Powell's scheduled speech on the current economic issues, due later during the early North American session.
Heading into Wednesday's key event risk, the US economic docket – highlighting the release of Producer Price Index (PPI) – might influence the USD price dynamics and produce some short-term trading opportunities.
Technical levels to watch