NZD/USD susceptible to negative slope in 50-Day SMA

NZD/USD Outlook

NZD/USD continues to pullback from the monthly high (0.6295) after failing to clear the 50-Day SMA (0.6294), and the exchange rate may track the negative slope in the moving average as it struggles to retain the advance from the yearly low (0.6085).

NZD/USD susceptible to negative slope in 50-Day SMA

NZD/USD gives back the advance following the Federal Reserve interest rate decision as it carves a series of lower highs and lows, and the exchange rate may largely mirror the weakness in the Australian Dollar as a bear flag seems to be unfolding in AUD/USD.

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Source: CME

However, speculation for an imminent change in regime may produce headwinds for the US Dollar as the CME FedWatch Tool reflect a greater than 80% probability for a Fed rate cut in September. As a result, expectations for lower US interest rates may limit the downside risk for NZD/USD as the Reserve Bank of New Zealand (RBNZ) acknowledges that ‘demand continues to outpace supply, and this continues to be reflected in high domestic inflation.’

In turn, the RBNZ may implement another rate hike at its next meeting on April 4 and Governor Adrian Orr and Co. may retain a hawkish forward guidance as the most recent Monetary Policy Statement (MPS) shows a steeper path for the official cash rate (OCR).

With that said, NZD/USD may stage further attempts to push above the 50-Day SMA (0.6294) as the RBNZ appears to be on track to pursue a more restrictive policy, but the exchange rate may track the negative slope in the moving average as it struggles to retain the advance from the yearly low (0.6085).

New Zealand Dollar Price Chart – NZD/USD Daily

Chart Prepared by David Song, Strategist; NZD/USD on TradingView

• NZD/USD carves a series of lower highs and lows after failing to push above the 50-Day SMA (0.6294), and the exchange rate may track the negative slope in the moving average as it continues to pullback from the monthly high (0.6295).
• A move below 0.6170 (50% Fibonacci extension) may push NZD/USD towards the yearly low (0.6085), with a break/close below 0.6070 (61.8% Fibonacci extension) opening up the 0.5910 (61.8% Fibonacci extension) to 0.5960 (23.6% Fibonacci retracement) region.
• However, NZD/USD may face range bound conditions if it continues to hold above 0.6170 (50% Fibonacci extension), 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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