NZD/USD Review: Kiwi hit 29-month low on RBNZ's dovish forward guidance

• The Reserve Bank of New Zealand dovish interest rate forward guidance NZD lower across the board.
• The NZD/USD pair fell to 0.6664 - the lowest level since March 2016.
• The daily chart shows a pennant breakdown - a bearish continuation pattern.

The NZD bears are ruling the roost after the RBNZ's unexpected dovish forward guidance.

The currency pair fell to a 29 - month low of 0.6664 earlier today and was last seen trading at 0.6681.

The kiwi dollar ran into offers around 0.6675 around five hours ago after the RBNZ kept rates unchanged as expected, but surprised markets by revising lower the September 2019 interest rate forecast to 1.8 percent from the previous forecast of 1.9 percent.

Further, RBNZ governor ORR said the central bank expects the interest rates to stay at the current level of 1.75 percent through 2019 and into 2020. This essentially means the yield differential will remain biased toward the USD bulls for another two years.

Thus, NZD could continue to lose altitude in the near future. The escalating US-China trade tensions could only add the bearish pressure around the kiwi.

The technical studies are also indicating scope for a deeper drop. For instance, the pennant breakdown seen in the daily chart below suggests the sell-off from the June 2018 high of 0.76060 has likely resumed and the pair risks falling to 0.6360 (target as per the measured move method) in the near-term.

Daily chart

Resistance: 0.6688 (July 3 low), 0.6735 (lower end of the pennant), 0.6760 (10-day moving average)

Support: 0.6662 (daily pivot support 3), 0.6621 (daily pivot support 4), 0.66 (psychological support)