The Current State of NZD/USD
- NZD/USD retreats to 0.6020 as the US Dollar extends its upside.
- Dismal market sentiment due to US political uncertainty weighs on risk-sensitive assets.
- NZD/USD stays below the 61.8% Fibo retracement.
The NZD/USD pair is experiencing a setback, dropping close to 0.6020 after a brief recovery during Wednesday’s European session. This decline is attributed to the strengthening US Dollar (USD) fueled by rising US Treasury yields. The 10-year US bond yields have surged to nearly 4.22%, reaching a 12-week high, amidst uncertainties surrounding the US presidential elections and risks in the Middle East.
The US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, has climbed to around 104.40.
Further supporting the US Dollar’s strength is the upward revision of US growth projections by the International Monetary Fund (IMF) for the current and upcoming years. The IMF anticipates the US economy to conclude 2024 and 2025 with a Gross Domestic Product (GDP) growth of 2.8% and 2.2% respectively.
On the other hand, the New Zealand Dollar (NZD) is facing pressure due to subdued market sentiment. The sharp drop in S&P 500 futures during European trading hours indicates a decline in investors’ risk appetite.
Technical Analysis of NZD/USD
The NZD/USD pair has hit a fresh two-month low near 0.6020, resuming its downward trajectory after retreating from the 61.8% Fibonacci retracement level around 0.6050. This retracement is calculated from the low on July 29 at 0.5857 to the high on September 30 at 0.6380.
Key technical indicators include:
- A bear cross between the 20- and 50-day Exponential Moving Averages (EMAs) near 0.6150, signaling a downward trend.
- The 14-day Relative Strength Index (RSI) below 30.00, indicating strong bearish momentum.
If the pair breaches the psychological support level of 0.6000, further downside is probable towards the low on August 15 at 0.5974 and the round-level support at 0.5900. Conversely, a reversal above the high on October 8 at 0.6146 could drive the asset towards the 50-day EMA at 0.6173 and the high on October 4 near 0.6220.
NZD/USD Daily Chart
New Zealand Dollar FAQs
Here are some frequently asked questions about the New Zealand Dollar (NZD) and its influencing factors:
- The Performance of the Chinese Economy: The Kiwi’s value can be impacted by the Chinese economy, as China is New Zealand’s largest trading partner. Changes in the Chinese economy can affect New Zealand exports and, subsequently, the NZD.
- Reserve Bank of New Zealand Policies: The RBNZ aims to maintain inflation between 1% and 3% over the medium term, influencing interest rates and the value of the NZD.
- Macroeconomic Data Releases: Economic data in New Zealand can impact the valuation of the NZD, with strong economic indicators supporting a stronger NZD.
- Risk Sentiment: The NZD tends to strengthen during periods of low market risks and weaken during times of uncertainty and market turbulence.
Analysis and Significance
In summary, the current situation with the NZD/USD pair highlights the following key points:
– The NZD/USD pair is facing downward pressure due to the strengthening US Dollar and subdued market sentiment.
– Technical indicators suggest a bearish trend for the pair, with potential downside towards key support levels.
– Factors such as Chinese economic performance, RBNZ policies, macroeconomic data releases, and risk sentiment play crucial roles in influencing the value of the New Zealand Dollar.
Understanding these dynamics and factors can provide valuable insights for investors and individuals looking to comprehend the implications of currency movements on their financial decisions and future planning. By staying informed about these elements, individuals can make more informed choices regarding their investments and financial strategies.