The NZD/USD falls as the risk of negative interest rates in New Zealand continues.


The NZD/USD price declined slightly as the market continued to focus on negative prices.
The RBNZ has stated that it could push down negative prices to boost inflation.
A report from NZIER showed that corporate confidence improved in the third quarter.

The NZD/USD price fell by 0.35% even after positive economic figures from New Zealand. The price also reacts mildly to last week’s elections. It is trading at 0.6580, which is slightly above the intraday low of 0.6567.

NZD/USD declines even with rising business confidence
New Zealand business confidence increases

The New Zealand dollar is reacting to news that business leaders are becoming more optimistic about the economy. According to the New Zealand Institute for Economic Research (NZIER), the business climate improved from -63% to -40% in the third quarter.

The institute noted that a net 1% of all companies in the country reported robust trade activity as the government continues to implement its unprecedented stimulus package. As a result, most companies have continued to hire and invest in growth. Indeed, hiring has led to labor shortages in some industries.

By sector, the construction industry is the most confident and the net share of 7% of construction companies is expected to improve in the coming months. This is partly due to the fact that the government has increased its spending budget in response to the pandemic.

On the other hand, the service sector is the most pessimistic due to the challenges facing the tourism and hospitality industry. Although New Zealand has not reported any Covid cases recently, the government remains cautious about its borders and arrivals. Manufacturers are less pessimistic.

Meanwhile, the NZD/USD price is also reacting to the weekend’s election, in which incumbent Jacinda Arden won by landslide. Her party also won the parliament with a landslide victory, which means that politics will remain unchanged.

At the same time, the pair is reacting to the recent promise by the central bank that it is serious about the negative interest rates. In a statement last week, Deputy Governor Christian Hawkesby said that the bank was seriously considering switching to negative interest rates for the first time in its history. These interest rates would reduce the cost of borrowing for individuals and businesses. But they would be bad for banks and savers.

NZD/USD technical outlook
Technical Table NZD/USD

The NZD/USD price is trading at 0.6580, which is below the 25-day and 15-day exponential moving average. The price has also moved above the bottom line of the Donchian Channel. First of all, the Donchian is an indicator that represents the highest and lowest levels of an asset in a given period of time.

The price is also slightly above the important resistance, which is shown in pink. This resistance connects the lowest levels in September and October. As a result, the pair is likely to continue to rise today as bulls target the middle Donchian level at 0.6620. Begin your trading journey with our free forex courses.


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