The Reserve Bank of New Zealand held their monetary policy meeting on Wednesday at 17:00 EST. The statement release triggered a small rally in the currency pair but gains were not sustained as the press conference, held an hour later, provided the catalyst for a sharp reversal.
The RBNZ kept rates unchanged as expected and stated that monetary policy will remain accommodative for a considerable period which is unchanged from prior rhetoric from the central bank.
The statement revealed fewer concerns about the overheating housing market although there remain risks, primarily from immigration and low-interest rates.
Policymakers noted slow growth last quarter and have some expectation for headline inflation to slow in the coming quarters although inflation is expected to hold at 2% targets over the medium-term.
There was a reference to the trade-weighted exchange rate which has risen significantly since the Bank’s last meeting in May. The Bank stated that a lower New Zealand dollar is needed.
NZD/USD reached a high of 0.7367 during the press conference and reversed lower to give back gains. An acceleration of downside momentum was seen ahead of the European open today following a break of support at 0.7311. The currency pair found support near 0.7260 as the lower bound of a declining channel came into play.
A declining trend channel in NZD/USD has encompassed price action since the end of July. The pair turned from the upper line of the channel during the press conference and was seen bouncing from the lower line of the channel earlier today.
Near-term resistance for the pair falls at 0.7311 which is a respected level on a weekly chart. The next level of support resides at 0.7238 and marks the December 2016 spike high.
From the United States today, the producer price index declined 0.1% in July to miss the analyst forecast for a rise of 0.1%. The annual gain of 1.9% was also short of an expected rise of 2.2%.
Weekly unemployment claims rose to 244,000 for the week ending August 4th, slightly missing the analyst consensus for 240,000 claims.
The US data release triggered a broadly weaker dollar although NZD/USD struggled to gain on the disappointment.