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  • NZD/USD is flashing green and approaching key resistance at 0.6303.  
  • New Zealand’s government posted biggest fiscal surplus in over a decade.  
  • New Zealand has fiscal room to increase spending to counter the economic slowdown.

The bid tone around the New Zealand Dollar (NZD) strengthened, pushing the NZD/USD pair higher to 0.63 from 0.6289 after New Zealand’s government unveiled a bumped fiscal surplus.

The Crown accounts released Tuesday showed the government’s surplus rose by $2 billion to $7.5 billion in the fiscal year ended June 2020, beating the Treasury’s forecast by $4 billion by a big margin.

Further, the net government debt dropped to 19.2% of GDP, down from 19.9% a year ago.

As a result, the government can afford to loosen its belt to counter the downward pressure on the economy. Put simply, the fiscal policy can play alongside monetary policy, helping the Reserve Bank of New Zealand (RBNZ) avoid falling into the zero interest rate policy trap.

Hence, the path of least resistance for the Kiwi appears to be on the higher side. As of writing, the pair is trading just below 0.63.

The hourly chart shows the pair is still trapped in a falling channel with resistance at 0.6303. A break higher would expose recent highs above 0.6335.

Technical levels