Top Story

NZD/USD: Could the kiwi make a comeback?

The NZD/USD has been falling steadily ever since the RBNZ delivered its last policy statement at the start of this month. The New Zealand central bank said it will remain on hold until after the new government is formed in September, but that the next rate change will be an increase. The market interpreted this as a dovish move and consequently the NZD dropped. But at a record low 1.75%, interest rates in New Zealand are one of the highest among the developed economies. With equity markets surging to new unchartered territories in the US and multi-year highs in Europe, sentiment appears to be pretty much bullish. The positivity stemming from the stock markets could weigh on the perceived safe-haven US dollar and underpin risk-sensitive currencies such as the Australian and New Zealand dollars. Trouble is, the US dollar has acted anything but a safe-haven asset: it has rallied alongside the equity markets, mainly due to the fact that central banks outside of the US have remained dovish. But the intermarket relationships can and will break and I wouldn’t be surprised if the twain went their separate ways.

As for the NZD/USD, this currency pair could make a dramatic comeback if a key support level at 0.7130/5 holds firm. Otherwise it may drop towards 0.70 again before deciding on is next move. The 0.7130/5 level marks the convergence of the low from last week and the rising 200-day moving average. Given the importance of these technical indicators, a bounce of some sort appears likely. But there is a potential that the kiwi could find significant support here, before surging higher. Anything is possible. However for the buyers to come back in force, they will need a couple of things to go in their way. First, the abovementioned 0.7130/5 level needs to hold as support on a daily closing basis. Second, resistance at 0.7240 then needs to break. If these conditions are met, we could see a nasty short-squeeze rally.

Conversely, if the NZD/USD closes below the 0.7130/5 level then 0.7000 could be the next bearish target. However there are a couple of other potential support levels on the way to 0.7000, including the 61.8% Fibonacci retracement at 0.7060. 

Source: eSignal and FOREX.com.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

OPEN AN ACCOUNT