The New Zealand dollar is falling back from the 0.6250 resistance level against the US dollar due to weaker economic data in the manufacturing sector from the New Zealand economy.
Earlier today the Business NZ Performance of Manufacturing Index in New Zealand came at 48.9 in May 2023 down from 49.1 in the prior month, while remaining in the contraction zone.
The below 50 number marked the fifth month of contraction in the last seven months in the manufacturing sector as production (45.7 vs 47 in April) did not return to expansion.
Meantime, employment (49.5 vs 47.8) remained subdued, and deliveries (46 vs 51.5) shrank. On the other hand, new orders (50.8 vs 49.8) expanded after two months of contraction and finished stocks were lifted.
Overall, the NZDUSD pair is currently moving lower, however, it has recovered by over 200 points recently. The global economy is still very poor, which is something that could affect the performance of the NZDUSD pair.
According to the ActivTrader market sentiment tool some 78 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 0.6250 area.
NZDUSD Short-Term Technical Analysis
The four-hour time frame shows that a bullish bias is play as the NZDUSD pair has repeatedly started to move stay above the Ichimoku Cloud on the mentioned time frame.
Currently, the upside looks good this week only above 0.6180. The NZDUSD pair must stay above the base line of the indicator, around the 0.6200 level, to have a stronger chance of reversing.
NZDUSD Medium-Term Technical Analysis
The daily time frame shows that the pair looks to be bearish as it sits under the Ichimoku Cloud, which has turned red, indicating a negative price trend.
According to technical analysis we could see more downside likely while the NZDUSD pair trades below the 0.6280 level, a move under the 0.6180 level, could prompt a decline towards 0.6100.