The New Zealand dollar is on the rise as antipodean currencies become more optimistic towards the economic environment and the recent problems associated with the banking sector.
New Zealand has faced severe problems from Cyclone Gabrielle. On the impact of Cyclone Gabrielle, the RBNZ stated growing inflation and output disruptions are expected in the near term.
However, rebuilding work will lift activity in the coming years. The best contribution monetary policy can make is to free up resources elsewhere by slowing demand through higher interest rates.”
The Reserve Bank of New Zealand also raised the official cash rate during its first meeting of the year by 50bps to 4.75%, the highest since January 2009 and matching market consensus.
The move was the 10th straight rise, bringing a total of 450bps hikes since October 2021, the most aggressive tightening since 1999. The board underscored both consumer inflation at an annual rate of 7.2% and core inflation were elevated, inflation expectations – unfavourable, and employment were beyond its sustainable level.
Overall, the NZDUSD pair is still showing signs of a price bottom. However, we really need to see more confirmation the US dollar index topping out, with sure confirmation before we get too excited.
According to the ActivTrader market sentiment tool some 73 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 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.
Moreover, the downside may be limited after several range low attacks failed. It possible we are going to see a move towards the range high now, around the 0.6300 level.
NZDUSD Medium-Term Technical Analysis
The daily time frame shows that the pair looks to be undergoing no major trend change as it sits in between its 50-day moving average and its 200-day moving average.
So far this key moving average is holding are holding any breakout from happening.
According to technical analysis we could see more upside likely while the NZDUSD pair defend this key metric, however, a move under the 200-day moving average could prompt a decline towards the 0.5800 area.