The NZD/USD moved lower in the first half of last week as demand for risky assets withered and investors shed their holdings in the New Zealand dollar. The Kiwi declined and at one point it even hit a fresh new low for the period after mid-June. Then we saw the sentiment among traders slightly improve and as a result the high-yielding currency pared some of its losses, bouncing off of its lows. On Wednesday, the Reserve Bank of New Zealand decided to retain its official cash rate at 2.50%, but that didn’t put off investors and they continued entering in long positions. On the following day, after the ECB President Mario Draghi declared his willingness to do whatever is necessary to preserve the integrity of the Eurozone, the New Zealand dollar was boosted even higher and it was able to push above its 25-period, its 50-period and its 200-period moving averages in a single strong push. Friday was also particularly good for the NZD/USD as the appetite for risky assets remained strong. The Kiwi marked a new high against its U.S. counterpart for the period after early May and finished close to the highs of 0.8112 for the day. This week the New Zealand dollar is moving in a very tight range, unable neither to push decisively above the previous week’s highs nor to retract to the support at the 0.8050 level. Even the business confidence report, which indicated that the companies grew somewhat more optimistic on the economy in the previous month, was not enough to encourage the market participants to enter the market ahead of the rate decision meetings later in the week.
Technically speaking the support in the NZD/USD is provided by the highs we reached in early July around 0.8050. Resistance, on the other hand, stands at the 0.8100, which we are currently testing. The 25-period and the 50-period moving averages continue to be in a golden cross formation, which technicians often interpret as a bullish signal. Oscillators are moving sideways, but they continue to be very close to the upper band of their respective ranges. The relative strength index is currently standing at 66, while the stochastic is at 78. The MACD has just hit highs not seen since mid-June and it is issuing sell signals. These signals, however, are yet to be confirmed by other technical indicators. On the economic front, we have only the ANZ commodity prices being announced on Thursday. But since the Federal Reserve and the ECB meetings will probably have a significant impact on the markets as whole investors are advised to monitor closely the developments around these two events.
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.