NZD/USD is expected to consolidate with bearish bias after hitting a one-month low of 0.7249 onTuesday as markets await the Reserve Bank of New Zealand interest rate announcement at 20:00 GMT (RBNZ is widely expected to leave rates on hold at 3.5%). Kiwi sentiment was hurt by food safety issue for the New Zealand dairy industry after police revealed a threat to contaminate infant and other dairy formula. NZD/USD is also undermined by bullish dollar sentiment, soft commodity prices and kiwi sales on the buoyant AUD/NZD cross and kiwi sales on the soft NZD/JPY cross amid increased investor risk aversion. The NZD/USD losses are tempered by the NZD-USD yield differential.
The daily chart is negative-biased as the MACD and stochastics are bearish, although the latter is at the oversold levels. Five-day moving average is below 15-day moving average and is declining.
The pair is trading below its pivot point. It is likely to trade in a lower range as far as it remains below the pivot point. Short positions are recommended with the first target at 0.72. A break of that target will move the pair further downwards to 0.7240. The pivot point stands at 0.7150. In case the price moves in the opposite direction and bounces back from the support level, it will move above its pivot point. It is likely to move further to the upside. According to that scenario, a long position is recommended with the first target at 0.7450 and the second target at 0.7410.
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