NZD/USD bulls ride ont he coattails of the CAD

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  • NZD/USD has denied the bears from support but has run back into resistance. 
  • There are prospects of a 50% mean reversion prior to higher-highs.
  • Commodity complex lifted by BoC decision to taper, underpinning risk-appetite. 

NZD/USD has been a top performer this week, initially rallying to the upside with little in the way of a clear catalyst, but has since found renewed support on rising optimism on the global economic outlook.

At the time of writing, NZD/USD is trading at 0.7208 and higher o the day by 0.57% having travelled from a low of 0.7162 to a high of 0.7218. 

Initially, the Consumer Price Index result did little to impact the bird given the modest acceleration to 1.5% YoY from 1.4% YoY and given that the central bank had stated that it will look through temporary rises in inflation.

With that being said, it may on the margin diminish fears that the Reserve Bank of New Zealand will resort to a negative interest rate.  

However, the Bank of Canada’s decision to taper its weekly bond purchases today by 25% to C$3bn is bullish for the commodities complex as it reflects an improvement in global economic activity.

”The BoC noted that ‘as vaccines roll out and the economy reopens, consumption is expected to rebound strongly in the second half of this year and remain robust over the projection.’ This tapering stands in contrast to other major central banks, notably the Fed, who have continued to emphasise that monetary policy needs to remain stimulatory for a long time to ensure they meet their mandates,” analysts at ANZ Bank explained. 

The RBNZ may be presumed in the market to walk the same line as the BoC which is highly supportive for the positive outlook for the bird. 

With that being said, however, analysts at Rabobank expect the RBNZ to ”retain a cautious stance on policy for an extended period and see scope for dips back to the  0.71 area on a 3-month view assuming a broad-based improvement in the tone of the USD.”

”We see NZD/USD at 0.72 on a 6-month view assuming further signs of economic recovery in New Zealand on that horizon.”

NZD/USD technical analysis

The bears were denied a trip to the downside and the price has rallied from support. 

However, there is scope for a meanwhile correction from the resistance zone to old resistance which would be expected to hold initial tests and draw in the bids for prospects of a fresh bullish impulse for a higher high. 

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