The New Zealand Dollar (NZD) is on the rise in Monday’s early Asian session, approaching the key psychological level of 0.6000. This surge comes as market sentiment shifts away from expectations of a rate cut by the Reserve Bank of New Zealand (RBNZ) at its upcoming meeting on Wednesday, following a strong employment report. Additionally, positive Chinese inflation data has further supported the Kiwi, as China remains a significant trading partner for New Zealand.
Despite these positive developments, increased volatility and geopolitical risks in the Middle East could dampen the Kiwi’s gains and limit its upward potential. Investors are eagerly awaiting the outcome of the RBNZ interest rate decision on Wednesday, while keeping an eye on key US economic indicators such as the Producer Price Index (PPI), Consumer Price Index (CPI), and Retail Sales throughout the week.
Market Analysis: RBNZ Rate Cut Unlikely, NZD Strengthens
- 12 out of 21 economists predict that the RBNZ will maintain the OCR at 5.5% in its upcoming meeting.
- The NZIER Shadow Board is divided on whether the RBNZ should lower the OCR, with some members advocating for a cut due to economic weakness, while others suggest keeping rates unchanged.
- Chinese CPI data for July exceeded expectations, indicating a stronger economy and boosting the NZD as a China-proxy currency.
- Fed Governor Michelle Bowman’s remarks suggest that the Fed may not rush to cut rates in September, leading to a decline in rate cut expectations.
Technical Analysis: NZD/USD Outlook
Although the New Zealand Dollar has seen an uptick, the NZD/USD pair remains bearish on the daily chart, staying below the key 100-day Exponential Moving Average (EMA). The Relative Strength Index (RSI) hovers around the neutral zone, indicating potential consolidation before a clear direction is established.
In a bullish scenario, resistance levels to watch include 0.6050 and 0.6080, with further upside potential towards 0.6134. On the downside, support levels are at 0.5912 and 0.5856, with a break below signaling further bearish momentum.
US Dollar Performance Against Major Currencies
The US Dollar (USD) experienced mixed performance against major currencies, with the NZD emerging as the strongest gainer. The heat map below illustrates the percentage changes of USD against key currencies, highlighting the NZD’s outperformance.
Key Factors Influencing the NZD
- The health of the New Zealand economy and RBNZ policy decisions play a significant role in determining NZD value.
- Chinese economic performance impacts the Kiwi due to trade relations between the two countries.
- Interest rate differentials and macroeconomic data releases also influence NZD movements.
- Market sentiment and risk appetite affect the NZD’s strength during risk-on periods.
By understanding these factors and monitoring key events and data releases, investors can make informed decisions regarding the New Zealand Dollar and its potential impact on their portfolios.