The New Zealand Dollar (NZD) continues its upward trend in the early Asian session on Wednesday, supported by a weaker US Dollar and positive risk sentiment. The USD Index (DXY) is near yearly lows, boosting the Kiwi’s strength. Additionally, China’s measures to support the real estate sector have bolstered market confidence, as China is New Zealand’s largest trading partner.
Despite the recent rate cut by the Reserve Bank of New Zealand (RBNZ), which could limit the NZD’s gains, investors are eagerly awaiting the US August S&P Global PMI data release later today. Furthermore, all eyes will be on Fed Chair Powell’s speech at the Jackson Hole symposium on Friday, with any dovish comments likely to weaken the USD and propel NZD/USD higher.
Key Market Movements: NZD Strengthens Amid Dovish Fed
- The People’s Bank of China (PBOC) maintains Loan Prime Rates at 3.35% and 3.85%, supporting market stability.
- China’s additional measures to boost the real estate sector have a positive impact on market sentiment.
- New Zealand’s Trade Balance data shows a decrease in exports and an increase in imports, impacting the country’s economic outlook.
- Fed Governor Michelle Bowman remains cautious about policy shifts, citing inflation risks as a concern.
- Market expectations for a Fed rate cut in September have slightly decreased, affecting investor sentiment.
Technical Analysis: NZD/USD Outlook
On a technical basis, the NZD/USD pair remains bullish, with key resistance levels at 0.6222, 0.6279, and 0.6360. Support levels are at 0.6130, 0.6070, and 0.5974. The pair’s momentum is supported by the 14-day RSI, indicating a favorable upside potential.
Understanding the New Zealand Dollar
The NZD’s value is influenced by factors such as the health of the New Zealand economy, RBNZ policies, Chinese economic performance, and dairy prices. Additionally, interest rate differentials and macroeconomic data releases play a significant role in determining the NZD’s strength or weakness. During risk-on periods, the NZD tends to strengthen, while market turbulence can lead to its depreciation.