NZD/USD drops below 0.5900 ahead of RBNZ rate decision

• NZD/USD fell to fresh multi-week lows below 0.5900 on Tuesday.
• The broad-based US Dollar strength weighed on the pair.
• RBNZ is forecast to leave its policy rate unchanged at 5.5%.

Following Monday's sharp decline, NZD/USD came under renewed bearish pressure on Tuesday and dropped to its weakest level in nearly three weeks below 0.5900. At the time of press, the pair was down 0.8% on the day at 0.5895.

USD rally continues on Tuesday

The risk-averse market environment provided a boost to the US Dollar (USD) in the second half of the day and forced NZD/USD to continue to push lower. Reflecting the souring market mood, Wall Street's main indexes opened deep in negative territory. As of writing, the S&P 500 Index was losing 1.3% on the day and the Nasdaq Composite was down 1.6%.

Meanwhile, the number of job openings on the last business day of August stood at 9.6 million, the US Bureau of Labor Statistics (BLS) reported on Tuesday, compared to 8.9 million in July. This reading surpassed the market expectation of 8.8 million by a wide margin and highlighted tight labor market conditions in the US. The benchmark 10-year US Treasury bond yield climbed to fresh multi-year highs above 4.7% after this data and the USD gathered further strength against its major rivals.

In the early Asian session on Wednesday, the Reserve Bank of New Zealand (RBNZ) will announce monetary policy decisions. The RBNZ is widely expected to leave its policy rate unchanged at 5.5%. 

Previewing the RBNZ policy meeting, "we expect the RBNZ to retain the tightening bias expressed in the August Statement and will aim to retain maximum flexibility to tighten (or not) in November should data warrant," said analysts at Westpac. "A surprise tightening to 5.75% is a risk, but we think no more than a 10-20% chance," they added.

Technical levels to watch for