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The New Zealand dollar is on the rise against the US dollar currency due to the RBNZ enforcing a more aggressive rate hike than expected, leaving the door wide open for more rate hikes.
This the NZDUSD pair spiked higher after the Reserve Bank of New Zealand lifted the official cash rate during its April meeting by 50 basis points to 5.25%, the highest since December 2008.
Today’s move was the 11th straight rise, defying market expectations of a 25bps hike as the board maintained its pace of tightening, amid consumer inflation that was still persistently high and employment beyond its maximum sustainable level.
More gains ahead look assured for the New Zealand dollar against the US dollar and also the Australian dollar as the Fed and the RBA look to be moving in the opposite direction of the RBNZ.
Overall, the NZDUSD pair is currently signs of a price bottom. However, we really need to see more confirmation as the global economy is still poor, which is something that could affect the performance of the NZDUSD pair.
According to the ActivTrader market sentiment tool, some 58 percent of traders are bullish towards the NZDUSD pair. As we typically look to fade sentiment biases, this could mean the NZDUSD pair could start to reverse lower.
It is worth mentioning that high levels of bullish sentiment suggest a classic contrarian sentiment trade is still in the making, so do be careful buying this pair at the current level, especially since the recent rejection from the 0.6300 area.
NZDUSD Short-Term Technical Analysis
The four-hour time frame a shows that a bullish bias is play as the NZDUSD pair has repeatedly struggled to move stay under its 200-period moving average, now that is not the case.
Moreover, the upside looks good after a major triangle pattern breakout. The only issue is momentum. The NZDUSD pair must stay above the triangle, around the 0.6300 level.
NZDUSD Medium-Term Technical Analysis
The daily time frame shows that the pair looks to be undergoing a major trend change as it breaks above its 50-day moving average and its 200-day moving average.
According to technical analysis we could see more upside likely while the NZDUSD pair defend this key metric, a move towards the 0.6500 resistance line could prompt a decline or breakout.
