Expert Analysis: NZD/USD Falls as USD Strengthens
The NZD/USD pair experienced a sharp decline, nearing the crucial support level of 0.6300, during Tuesday’s New York session. This drop was triggered by selling pressure above the key resistance of 0.6350. The US Dollar (USD) strengthened, reaching a weekly high, as investors adopted a cautious stance ahead of a series of important US economic data releases.
Factors Contributing to the Decline:
- US Economic Data: Market participants are closely monitoring the US data releases as they will impact the Federal Reserve’s interest rate outlook.
- Upcoming Releases: Today’s focus is on the US ISM Manufacturing PMI for September and the JOLTS Job Openings data for August, scheduled for publication at 14:00 GMT.
- China’s Stimulus: The Kiwi dollar’s strength remains supported by China’s significant stimulus measures aimed at economic revival.
Key Data Points:
- The ISM Manufacturing PMI is expected to show a slight improvement to 47.5 from 47.2 in August, indicating continued weakness in the factory sector.
- Job Openings are projected to have grown steadily to 7.67 million, following the trend seen in July.
- Later this week, attention will shift to the US ADP Employment Change, ISM Services PMI, and Nonfarm Payrolls (NFP) data for September.
Technical Outlook:
- Despite the recent decline, the near-term outlook for the Kiwi asset remains positive, supported by the 20-day Exponential Moving Average (EMA) sloping upwards around 0.6250.
- The 14-day Relative Strength Index (RSI) indicates a weakening momentum, falling into the 40.00-60.00 range.
Future Scenarios:
- Upside Potential: A break above the December 2023 high of 0.6400 could trigger further gains towards the August 2022 high of 0.6470 and the psychological resistance of 0.6500.
- Downside Risks: Failure to sustain above 0.6300 may lead to a decline towards the 20-day EMA support at 0.6250, with potential downside targets near the 0.6200 level.
NZD/USD Daily Chart
New Zealand Dollar FAQs
What Moves the NZD?
- The New Zealand Dollar’s value is influenced by the country’s economic health, central bank policy, Chinese economy performance, and dairy prices.
- Chinese economic news impacts the Kiwi due to China being New Zealand’s top trading partner, affecting exports and currency.
- Dairy prices are crucial as the dairy industry is New Zealand’s primary export, boosting income and the economy.
RBNZ Policies and Impact on NZD
- The Reserve Bank of New Zealand aims for 1-3% inflation, adjusting interest rates to maintain stability.
- Higher interest rates strengthen NZD by attracting investors, while lower rates weaken it.
- Rate differentials compared to the US Federal Reserve also impact the NZD/USD pair.
Macroeconomic Data and NZD Valuation
- Strong economic indicators like high growth, low unemployment, and confidence support NZD.
- Weak economic data leads to NZD depreciation.
- Economic strength may prompt the RBNZ to raise interest rates.
Market Sentiment and NZD
- NZD strengthens during low-risk periods and market optimism.
- It weakens during market turbulence or economic uncertainty as investors seek safer assets.
This comprehensive analysis provides valuable insights into the factors influencing the NZD/USD pair and the broader market dynamics. Understanding these dynamics is essential for investors to make informed decisions and navigate the ever-changing financial landscape effectively.