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RBNZ's Rate Cut Takes Effect, Limiting EURNZD's Upside Momentum
Forex
Summary:
The Reserve Bank of New Zealand (RBNZ) cut interest rates by 25 basis points on Wednesday but signaled limited scope for further easing. The EURNZD's decline encountered resistance following the RBNZ's policy adjustment, with further downside expected to be quite limited.
Buy
TradingEURNZD
EXP
2.03188
Entry Price
2.08630
TP
2.00530
SL
2.02658 +0.00256 +0.13%
0
Point
Flat
2.00530
SL
CLOSING
2.03188
Entry Price
2.08630
TP
Fundamentals
On Wednesday, the EURNZD weakened, buoyed by the Reserve Bank of New Zealand's rate cut and rising market expectations for a Federal Reserve rate cut in December. However, the asset's decline encountered resistance near 2.0335 and subsequently paused. As widely anticipated, the RBNZ cut the official cash rate by 25 basis points to 2.25%, but the tone of its statement proved more hawkish than market expectations.
Policy makers revealed that they had debated whether to keep the interest rate unchanged at 2.50% or lower it to 2.25%, ultimately deciding by a 5-1 vote. The sole dissenting member supported maintaining the rate, highlighting concerns among some policymakers about overly accommodative policies and reflecting a more cautious internal balance than many had anticipated.
For the market, more importantly, the RBNZ's updated forward guidance signals a more determined policy path. The bank now projects the Official Cash Rate (OCR) to bottom out at 2.2% in 2026 before gradually rising to 2.7% by the end of 2027. Should the economic outlook remain unchanged, this trajectory implies minimal scope for further rate cuts next year and effectively signals that today's move may mark the end of the easing cycle.
The accompanying statement further reinforced this message. The Reserve Bank of New Zealand indicated that economic activity will remain subdued until mid-2025 but is currently improving, with lower interest rates supporting household spending and the labor market stabilizing. The decline in the exchange rate has also boosted exporters' revenues, thereby reducing the need for more aggressive stimulus measures in the future. At present, risks to the inflation outlook are considered “balanced.”
Technical Analysis
From a technical perspective, the EURNZD is encountering significant resistance near the 2.0406 level, while initial buying support exists within the 2.0330–2.0360 range below. Prices continue to consolidate at elevated levels in the near term, though lacking the momentum for a decisive breakout.
If future data does not show a clear directional shift, prices are likely to fluctuate within the 2.0350–2.0450 range before resuming their upward trend.
The market currently holds relatively clear expectations regarding New Zealand's interest rate path, while the euro's macroeconomic backdrop remains relatively subdued. This makes it difficult for the EURNZD to develop a clear trend in the short term. With a lack of macroeconomic direction, range trading is likely to become the dominant pattern.
Trading Recommendations
Trading Direction: Buy
Entry Price: 2.0320
Target Price: 2.0863
Stop Loss: 2.0053
Valid Until: December 12, 2025 23:55:00
Support: 2.0271, 2.0077, 2.0004
Resistance: 2.0680, 2.0753, 2.0850
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