Two more potential interest rate cuts by the RBNZ
Also, it forecasts the OCR to drop further to a low of 2.55% in early 2026, versus 2.85% projected in May. Hence, based on this set of latest dovish projections, the RBNZ has indicated that it is likely not done with its interest rate cycle, with at least one more interest rate cut before 2025 ends, and a high chance of a second.
In today’s meeting, two RBNZ officials stood in the minority, advocating for a larger 50 bps rate cut, further reinforcing an indirect dovish monetary policy guidance.
Based on a 5-day rolling performance basis as at this time of writing, the Kiwi is the outlier and weakest currency against the US dollar (see Fig. 1).
The NZD/USD rallied by 2.5%; in contrast, the USD/JPY traded almost flat (0.2%). Therefore, the NZD/JPY cross opens an opportunity to construct a medium-term (1-3 weeks) trading set-up based on technical analysis.
Preferred trend bias (1-3 weeks)
Bearish bias below 86.95 key medium-term resistance for the NZD/JPY, and a break below 85.90 opens up scope for a further potential bearish impulsive down move sequence to expose the medium-term supports of 85.00 and 84.40/84.00 (also a Fibonacci extension cluster) (see Fig. 2).
Key elements
- The price actions of NZD/JPY have traded below moving averages (20-day, 50-day, and now 200-day), further cementing a medium-term downtrend phase that is in progress since the 28 July 2025 swing high area of 89.00.
- The 4-hour MACD trend indicator of the NZD/JPY has continued to trend downwards below its centreline, which reinforces a medium-term downtrend phase.
- Today’s ultra-dovish monetary policy guidance from the RBNZ has triggered a significant sell-off of 17 bps on the 2-year New Zealand government bond yield (sensitive to monetary policy) to plunge to a three-year low of 3.08%.
- The 2-year yield premium spread between New Zealand and Japanese government bonds has continued to shrink from 2.48% printed on 4 August to 2.24% at this time of writing, which in turn puts further downside pressure on the NZD/JPY cross rate.
