The NZD/USD currency pair is facing downward pressure as bears test dynamic support levels. On Monday, the pair fell from a high of 0.6255 to a low of 0.6232, down 0.3% on the day. The reason for this downward movement is due to risk-off sentiment dominating the market.
Risk-Off Tone Due to Higher Oil Prices Ahead of RBNZ
The risk-off tone in the forex market is being fueled by the weekend news about OPEC+ production cuts. Saudi Arabia and other OPEC+ producers announced that they would cut oil output by around 1.16 million barrels per day. The Saudi energy ministry stated that this voluntary cut was a precautionary measure to support oil market stability. This decision has led to soaring oil prices, with WTI crude oil opening the week with a significant price gap to print $81.51 during Monday’s Asian session.
How OPEC+ Production Cuts Affect Forex Market
The decision by OPEC+ to cut oil output has significant implications for the forex market. As oil prices rise, risk-off sentiment increases, which can cause investors to seek safe-haven assets like the US dollar. This has put downward pressure on the NZD/USD currency pair, as traders are selling the New Zealand dollar and buying the US dollar.
The market is now waiting for the Reserve Bank of New Zealand (RBNZ) to announce its monetary policy decision on Wednesday. The RBNZ is expected to keep interest rates unchanged at 0.25%, but the market is closely watching for any hints about future rate hikes. If the RBNZ is dovish in its statement, this could lead to further downside pressure on the NZD/USD currency pair.
In conclusion, the forex market is currently experiencing risk-off sentiment due to the OPEC+ production cut announcement. This decision has led to soaring oil prices, which has put downward pressure on the NZD/USD currency pair. Traders are now waiting for the RBNZ’s monetary policy decision, which could have further implications for the forex market. As always, it’s important to stay informed about global events and how they may affect the market.