NZD/USD extends dovish RBNZ-led slump, hits 2-1/2 year lows near mid-0.6600s

   •  Dovish RBNZ twist prompts some aggressive selling on Thursday.
   •  Renewed USD buying interest adds to the bearish pressure.
   •  Remains vulnerable amid escalating US-China trade tensions.

The NZD/USD pair extended its post-RBNZ slump and clocked fresh 2-1/2 year lows, around mid-0.6600s in the last hour.

As was widely anticipated, the RBNZ left the cash rate at 1.75% but the accompanying dovish monetary policy statement caught market participant off-guard and prompted some aggressive selling. The New Zealand’s central bank said it expects to keep the OCR at a record low for another two years - through 2019 and into 2020, a full year later than it projected in May. 

The central bank also lowered its forecast for economic growth over the coming year, amid risks to exports from global trade tensions, and further dented the already weaker sentiment surrounding the domestic currency. 

Meanwhile, the latest leg of downtick over the past hour or so could also be attributed to some renewed US Dollar buying interest. This coupled with escalating US-China trade tension might continue to drive some safe-haven flows towards the greenback and keep exerting downward pressure on the major. 

Technical levels to watch

The ongoing bearish momentum seems strong enough to continue dragging the pair further towards testing the 0.6600 handle en-route March 2016 swing lows, around the 0.6570 region.

On the flip side, any meaningful recovery attempt might now confront fresh supply near previous YTD lows, ahead of the 0.6700 handle, above which the pair could retest mid-0.6700s supply zone.