NZD/USD Struggles at Key Resistance Levels

Quick Look:

• NZD/USD stalled at 0.5920 and faces resistance at 0.5940 with further hurdles at 0.6100, 0.6135, and 0.6160.
• Positioned below 200-hour EMA of 0.5950; RSI below 60, suggesting potential upward movement.
• Cautious investor sentiment due to US inflation, geopolitical tensions, and high US interest rates.

The New Zealand Dollar (NZD) is presently encountering a slight dip against the US Dollar (USD), with trading pausing at a recovery plateau of 0.5920. Despite this setback, a bullish market sentiment looms on the horizon. Nevertheless, the currency pair encounters immediate resistance at 0.5940, with additional hurdles awaiting at pivotal levels such as 0.6100, 0.6135, and 0.6160.

Technical Indicators for NZD/USD

The NZD/USD pair is below the 200-hour exponential moving average (EMA) of 0.5950. Therefore indicating potential resistance in the near term. The 14-period Relative Strength Index (RSI) remains below 60, suggesting there might be room for upward movement if risk appetite returns. However, the currency faces significant support at 0.5870 and 0.5847, with an immediate floor around 0.5900.

Market Forces Impacting NZD/USD

Investors remain cautious due to persistently high inflation expectations in the US and geopolitical tensions affecting global markets. The US dollar has shown resilience, with the DXY index rebounding from 105.75 to just above 106.00. This has been further supported by a cautious opening in the S&P 500 and high 10-year Treasury yields, which currently stand at 4.63%.

Outlook for New Zealand’s Economy

New Zealand’s economic indicators suggest modest growth, with the Consumer Price Index (CPI) rising by 0.6% quarter-on-quarter in Q1 2024, bringing the annualized rate to 4%. The Reserve Bank of New Zealand (RBNZ) maintains a ‘higher for longer’ stance on interest rates, with expectations of rate cuts starting in November.

Worldwide Factors Impacting NZD/USD

Adding to the cautious sentiment are ongoing geopolitical tensions in the Middle East, with no truce in sight between Israel and Iran. Israeli Prime Minister Benjamin Netanyahu has reiterated the nation’s commitment to self-defence, affirming that their government will take all necessary measures to protect the state.

Furthermore, trade tensions between the US and China have escalated. President Biden has proposed increasing tariffs on Chinese steel and aluminium from 7.5% to 22.5%, citing unfair trade practices.

Future Outlook for NZD/USD

The NZD/USD pair presents a nuanced picture for traders and investors. While the overall trend forecast remains bullish, aiming for a target of 0.6000, the road there is fraught with technical and geopolitical hurdles. Market participants must navigate a landscape of high US interest rates, ongoing global tensions, and domestic economic developments in New Zealand. As always, vigilance and readiness to adapt to rapidly changing conditions will be crucial in the coming weeks.