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  • NZD/USD bulls are back in charge above the critical daily support structure.
  • The environment has been  risk on despite the holidays on Monday.

At the time of writing, NZD/USD is trading at 0.7217 and higher by some 0.78% on the day following a pop from the lows of 0.7158 to a high of 0.7218.

The US dollar was scraping the  bottom of the trend on Monday and languished near four-month lows against major currencies as bets on a robust global economic recovery continued to support currencies seen as riskier.

The dollar index  DXY  was oscillating around the    90 mark, down 0.22% at the time of writing and slightly above a four-month low on Friday of 89.646.

The safe-haven trade has retreated steadily with optimism about the global economic recovery and combined with a rise is US equities, the antipodeans are  tracking the weekly highs and headed for a strong close for the month.  

Global equities had a strong start to the week despite many European markets being closed for the Whit Monday public holiday which helped to push  the bird  back above 0.7200.

”While there was some moderation in the USD itself, the NZD has done well on most crosses, singling itself out as a performer,” analysts at ANZ bank explained.  

”This could be pre-positioning ahead of tomorrow’s MPS (past MPSs have boosted the Kiwi), and yesterday’s Q1 retail sales data was solid. But there are a lot of reasons for the Reserve Bank of New Zealand to remain cautious, and we think they will play it with a straight bat,” the analysts added.

”If we see the OCR track brought back (as we think is likely), that could cause some interpretation issues (especially if it signals hikes in, say late 2023), and hence volatility, but the main theme is one of the RBNZ echoing the cautious tone of other central banks.”

Meanwhile, from a positioning perspective,  while  NZD  faced a mild correction in its net shorts,  CFTC data for the week ending 18 May 2021 showed the aggregate dollar positioning was unchanged (at -6% of open interest) after four weeks of consecutive increases in net-short positions.  

NZD/USD technical analysis

The bears have been denied a free lunch according to the failed H&S pattern on the daily chart following the rally from neckline support and away from the 4-hour supporting trendline:

Prior analysis

Live market, daily chart

Instead, the bulls are back in charge above old resistance now turned support that is reinforced by the 21-EMA.