The NZD/USD pair has experienced a significant uptrend, reaching close to 0.6030 during Friday’s European session. This surge in the Kiwi asset can be attributed to the improved appeal for risky assets in the market. With fears of a US recession diminishing due to positive Retail Sales data for July and lower weekly Jobless Claims, investor sentiment has seen a notable boost.
Furthermore, S&P 500 futures have shown strong gains in European trading hours, indicating a rise in risk-appetite among investors. The US Dollar Index (DXY) has fallen to around 102.80, reflecting a limited upside for the Greenback.
Despite these positive developments, the short-term outlook for the New Zealand Dollar (NZD) remains uncertain following the Reserve Bank of New Zealand’s (RBNZ) unexpected decision to cut its Official Cash Rate (OCR) by 25 basis points to 5.25% on Wednesday.
Looking ahead, the direction of the US Dollar will be influenced by market speculation surrounding potential interest rate cuts by the Federal Reserve (Fed) for the rest of the year. Investors are eagerly awaiting Fed Chair Jerome Powell’s speech at the upcoming Jackson Hole (JH) symposium from August 22-24 for further insights.
Technical analysis shows that the NZD/USD pair is trading within a Symmetrical Triangle chart pattern on a daily timeframe, indicating a period of volatility contraction. The Kiwi asset has surpassed the 20-day Exponential Moving Average (EMA) near 0.6000, signaling a bullish trend in the near term.
The 14-day Relative Strength Index (RSI) is hovering in the 40.00-60.00 range, reflecting indecision among market participants.
If the asset breaks above the high from May 3 at 0.6046, it could potentially rally towards the highs from July 17 near 0.6100 and July 12 at 0.6127. On the other hand, a downside move below the low from April 19 around 0.5850 could lead to a decline towards the key support levels at 0.5800 and 0.5770.
NZD/USD Daily Chart
Analysis:
The recent surge in the NZD/USD pair can be attributed to improved market sentiment favoring risky assets and a decline in fears of a US recession. The RBNZ’s unexpected interest rate cut added an element of uncertainty to the NZD’s near-term outlook. Investors are closely monitoring Fed Chair Powell’s upcoming speech for further guidance on the US Dollar’s trajectory. From a technical perspective, the NZD/USD pair’s bullish trend is supported by the Symmetrical Triangle chart pattern and breach of the 20-day EMA. However, key resistance levels need to be surpassed for further upside potential, while downside risks exist if key support levels are breached. Overall, investors should closely watch upcoming economic data releases and central bank decisions to gauge the future direction of the NZD/USD pair and adjust their investment strategies accordingly.