The Current State of NZD/USD
- NZD/USD surges to near 0.6300 as China announces a slew of monetary stimulus.
- The Fed is expected to opt for a 50-bps interest rate cut in November.
- Investors await the US core PCE inflation data for August.
The NZD/USD pair is experiencing a significant rally, approaching the key resistance level of 0.6300 in Tuesday’s North American session. The New Zealand Dollar (NZD) is strengthening due to increased inflows, following China’s announcement of massive monetary stimulus to boost economic prospects, household spending, and real estate demand.
Impact of China’s Stimulus on NZD
New Zealand (NZ) is a major trading partner with China, and the recent stimulus announcement is expected to drive up Kiwi exports, further supporting the strength of the NZD.
Pressure on the US Dollar
Conversely, the US Dollar (USD) is under pressure as speculation grows about the Federal Reserve (Fed) implementing aggressive policy easing. The US Dollar Index (DXY) is nearing 100.75 as a result.
Key Focus Areas for Investors
Investors are closely monitoring Fed officials’ comments and the release of the US Personal Consumption Expenditure Price Index (PCE) for August on Friday. The core PCE inflation, a crucial indicator for the Fed, is expected to show an increase from 2.6% to 2.7%.
Technical Analysis of NZD/USD
The NZD/USD pair has been on an upward trend for the fifth consecutive trading day, approaching the annual high of 0.6400. The 20-day Exponential Moving Average (EMA) near 0.6200 indicates a positive near-term outlook.
The 14-day Relative Strength Index (RSI) is striving to stay above 60.00, signaling a bullish momentum if maintained.
If the asset surpasses the Year-To-Date (YTD) high of 0.6330, it could move towards the high of 0.6400, followed by the low of 0.6450.
In a different scenario, a downside move may occur if the asset breaks the high near 0.6100, leading it lower towards 0.6046 and 0.6000.
The Impact of External Factors on NZD
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is influenced by various factors such as:
1. Economic Health of New Zealand
The NZD’s value is tied to the country’s economic performance, with factors like high economic growth, low unemployment, and high confidence boosting the currency.
2. Chinese Economy
As China is New Zealand’s largest trading partner, developments in the Chinese economy can impact NZD, especially in terms of export demand and economic growth.
3. Dairy Prices
The dairy industry is a key sector for New Zealand’s exports. High dairy prices can positively impact the economy and strengthen the NZD.
4. Reserve Bank of New Zealand (RBNZ) Policy
The RBNZ’s decisions on interest rates and inflation targets play a crucial role in shaping the value of the NZD.