The New Zealand dollar was hit hard despite a rate hike. Where will it find a bottom? As the calendar is light, the kiwi is likely to continue digesting the words coming out of the central bank. Here is an analysis of fundamentals and an updated technical analysis for NZD/USD.
Yes, the RBNZ hiked the interest rate for the fourth consecutive time to 3.50%, but certainly changed its tone: it upped the ante against the strength of the kiwi and signaled a longer than predicted pause. In the US, the picture is mixed: excellent jobless claims and new home sales are met with weak new home sales and unconvincing inflation. Where will the pair go next?
[do action=”autoupdate” tag=”NZDUSDUpdate”/]NZD/USD daily chart with support and resistance lines on it. Click to enlarge:
- Building Consents: Tuesday, 22:45. The number of approvals is volatile, but each new house means a lot of economic activity around it. After a drop of 4.6% in May, a bounce is expected in June.
* All times are GMT.
NZD/USD Technical Analysis
Kiwi/dollar began the week capped under the 0.87 level (mentioned last week). A final attempt to move higher resulted in a sharp downfall. The pair was then capped under another round level, 0.86, before finding some support at 0.8550.
Live chart of NZD/USD:
[do action=”tradingviews” pair=”NZDUSD” interval=”60″/]Technical lines, from top to bottom:
We begin from lower ground this time: 0.8840. This is the ultimate line of resistance, that capped the pair back in 2011 and once again in July 2014 and was almost reached in 2014. It serves as a double top.
The May peak of 0.8780 is a very important line: the kiwi hesitated towards this line in June. The previous 2014 peak of 0.8745 is now weaker resistance after being broken.
The round number of 0.87 proved its strength during May and is now a pivotal line. The older swing high of 0.8640 worked as a pivotal line but eventually capped the pair.
It is followed by the round number of 0.86, which worked as a cushion during May 2014. The low of 0.8550 served as yet another pivotal line in the range.
The next level is the very round level of 0.85, which was support back in March. Below, 0.8435 worked in both directions in 2013 and is somewhat weaker now.
0.84 is minor support and the last line for now is 0.8335.
Long term uptrend reached
The pair is trading above an uptrend that dates back to February and was formed in early June. The recent drop sends the pair to tackle this line. Break or bounce?
I turn from bearish to neutral on NZD/USD
The pair made a long way down, a deterioration that accelerated now. Apart from support on the trendline, it is important to remember that the high yield that New Zealand offers keeps the kiwi bid. In addition, the RBNZ still intends to raise the rates, despite the longer than expected pause. In the US, things are improving, but the strengthening dollar might not necessarily be strongly felt in this specific pair.
More: EUR/NZD Breaks An Important Support Line
Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast.
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