Quick Look:
- NZD/USD edges higher by 0.55%, still under bearish control.
- Daily RSI at 44; Hourly RSI peaks at 76, hinting at short-term bullishness.
- Trades below key SMAs; bearish Measured Move pattern suggests targeting 0.5800s.
- US Services PMI miss vs. NZ economic contraction; RBNZ holds on rates.
- Short-term relief is possible, but the broader trend remains bearish.
In a slight divergence from the recent downtrend, the New Zealand Dollar (NZD/USD) edged higher against the US dollar, posting a daily increase of 0.55%. Despite this uptick, trading at the 0.6000 zone, the overall market sentiment remains heavily skewed towards the bears, indicating potential challenges for the Kiwi.
Technical View: Mixed Signals at Play
The technical indicators present a mixed yet predominantly cautious outlook. The Daily Relative Strength Index (RSI) has recovered from near-oversold levels. However, it continues to linger in negative territory, currently at 44. A sharper perspective is provided by the Hourly RSI, which has experienced a significant uptick, peaking at 76 before slightly retracting to 71, suggesting a potential short-term bullish momentum.
Contrastingly, the Hourly Moving Average Convergence Divergence (MACD) shows flat green bars, signalling a reduction in short-term momentum. Moreover, the bearish bias is underscored by the performance against Simple Moving Averages (SMA). The NZD/USD trading below the 20, 100, and 200-day averages, alongside a completed bearish SMA crossover between the 20 and 200-day averages.
Bearish Forecast: Targets Set at 0.5800s
The formation of a Measured Move pattern points towards a further decline, with expectations set for the pair to target the 0.5800s. This is further supported by the daily RSI dipping into oversold territory at a value of 29.32, aligning with the broader downtrend. The Fibonacci retracement levels suggest a conservative target at 0.5988, with a more expected target at 0.5847.
Mixed Economic Indicators Affect NZD/USD
Mixed economic signals frame the backdrop to these movements. A notable US Services PMI miss indicates potential weakness in the US economy, potentially providing short-term relief for the NZD. Conversely, New Zealand’s economic indicators show a contraction in Q4 2023, with a slight improvement in inflation rates.
The Reserve Bank of New Zealand (RBNZ) maintains a stance against cutting interest rates, citing persistent high inflation, a tight labour market, and high wage inflation as critical structural issues.
Consider Longs Amid NZD/USD’s Short Reprieve
Given the current technical and fundamental landscape, short sellers might consider closing their positions and potentially looking for long entries. Moreover, they are anticipating an upside correction before a continuation towards the bearish targets. This strategy aligns with the signal provided by the entry and exit from oversold levels on the RSI, suggesting a short-lived reprieve for the Kiwi.
While the NZD/USD has found some footing in the latest trading session, the broader picture remains bearishly tilted. Traders and investors should stay vigilant, balancing short-term fluctuations against the underlying bearish momentum and economic indicators that continue to shape the currency pair’s trajectory.