NZD/USD approaches the weekly low (0.6137) after staging another failed attempt to test the monthly high (0.6276), and the exchange rate may continue to give back the rebound from the monthly low (0.6085) as it initiates a series of lower highs and lows.
NZD/USD fails again to test monthly high
NZD/USD trades below the 200-Day SMA (0.6162) as New Zealand’s Gross Domestic Product (GDP) report shows a larger-than-expected decline in the growth rate, and the exchange rate may track the negative slope in the moving average as the US Dollar appears to be benefiting from the shift in risk appetite.
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Looking ahead, it remains to be seen if the 0.6% contraction in New Zealand GDP will sway the Reserve Bank of New Zealand (RBNZ) as the central bank argues that ‘core consumer price inflation remains too high,’ and Governor Adrian Orr and Co. may deliver another rate-hike at the next meeting on April 4 as the Monetary Policy Statement (MPS) from November 2022 shows a steeper path for the official cash rate (OCR).
According to the RBNZ, the OCR is projected to climb above 5% amid the ongoing effort to combat inflation, but the central bank may come under pressure to winddown the hiking-cycle as New Zealand’s GDP report casts a weakened outlook for growth.
With that said, NZD/USD may continue to depreciate ahead of the Federal Reserve interest rate decision on March 22 amid the failed attempt to test the monthly high (0.6276), but the developments coming out of the Fed may influence the near-term outlook for the exchange rate as the central bank is slated to update the Summary of Economic Projections (SEP).
New Zealand Dollar Price Chart – NZD/USD Daily
Chart Prepared by David Song, Strategist; NZD/USD on TradingView
- NZD/USD initiates a series of lower highs and lows following the failed attempts to test the monthly high (0.6276), with the move below the 200-Day SMA (0.6162) raising the scope for a move towards the March low (0.6085).
- NZD/USD may track the negative slope in the long-term moving average as the former support zone around 0.6260 (38.2% Fibonacci extension) to 0.6270 (38.2% Fibonacci retracement) seems to be acting as a resistance, with a move below the March low (0.6085) opening up the 0.6070 (61.8% Fibonacci extension) region.
- However, NZD/USD may face range bound conditions if it defends the monthly low (0.6085), with a move above 0.6220 (50% Fibonacci extension) bringing the 0.6260 (38.2% Fibonacci extension) to 0.6270 (38.2% Fibonacci retracement) area back on the radar.
--- Written by David Song, Strategist
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