07.08.201909:39 Forex-elemzések és áttekintések: The survival race has begun: What's next? (We expect a local recovery of the NZD/USD and AUD/USD pairs and then resumption of their fall)

Surprisingly for the markets, the Reserve Bank of New Zealand lowered its key interest rate by 0.50% instead by expected by 0.25%, which caused a collapse of the country's national currency.

The RBNZ, by its decision to lower interest rates by half a percentage point, sparked talk that the factor of trade wars unleashed by the American president last year. Primarily,the confrontation with China would be the reason for central banks to lead to a race for survival. It means that regulators will seek to lower their national currencies against major currencies in the wake of a slowdown in global economic growth and a narrowing of competitive opportunities.

In the early "tenths", something similar was already observed when others also had to lower borrowing costs in the wake of lower interest rates by world Central Banks. This is in order for imports from these countries could compete with products; for example, from the USA or Britain. But now everything is much more serious. The trade confrontation between Washington and Beijing led to the fact that the Chinese authorities decided to stop, until temporarily, state-owned food purchases in the United States in response to unprecedented pressure from the Americans. The financial authorities sharply reduced the renminbi against the dollar.

All of these indicate that the struggle began in earnest, which means that this may lead to the fact that the Fed will accept the challenge and begin to lower interest rates. That is why we are seeing a noticeable decrease in RBNZ interest rates. We believe that the Australian regulator may take this path in the near future. In this case, we should expect a continuation of the fall in the rates of New Zealand and Australian dollars.

In our opinion, the Federal Reserve is an example of a decision to lower interest rates by 0.25% either at the September or October meetings, if the tension in America and China grows. A slowdown in the growth of the American economy can also be an incentive, while, according to the dynamics of GDP, it has decreased not so catastrophically, only to 2.5% from 3.1% a year earlier and remains within acceptable limits. Further negative dynamics can serve as a serious reason for continuing to lower rates. In this case, the dollar may be under pressure.

Forecast of the day:

The NZD/USD pair found support at 0.6375 after a landslide fall amid the decision of the RBNZ to lower rates not by 0.25%, but immediately by 0.50%. We believe that the pair will continue to decline to 0.6245 either after a pullback up to 0.6435, or immediately after falling below the level of 0.6375.

The AUD/USD pair is also under pressure in the wake of a flaring trade won between the United States and China, which could also force the RBA to lower rates. We believe that the pair has every chance to continue falling to 0.6625 either after a pullback up to 0.6745 or after overcoming the level of 0.6680.