The NZDUSD currency pair has encountered a tumultuous journey amidst the backdrop of a strengthening Greenback, trading nearly 4% lower year-to-date.
As the Reserve Bank of New Zealand maintained its benchmark rates steady at 5.5%, mirroring U.S. rates, the spotlight shifts towards the impending release of U.S. consumer price inflation data for March. This follows closely on the heels of last week’s revelation of a robust U.S. labour market via higher-than-expected Nonfarm Payroll figures, igniting speculation regarding the timing of the first U.S. rate cut.
Amidst the interplay of labour market dynamics and inflation, markets are delicately poised, awaiting signals for potential shifts in monetary policy. With CME Group’s FedWatch tool indicating a 54% probability of a June rate cut, down from 62% prior to recent strong U.S. economic data releases last week, the stage is set for a pivotal juncture. Should the CPI number surge, it could lead to a recalibration of market expectations, potentially bolstering the Greenback while exerting downward pressure on the New Zealand Dollar.
Technical
The NZDUSD currency pair has been entrenched in a downtrend, trading below its 100-day moving average.
A significant resistance level recently materialized at 0.62166, following a sharp rejection of an upward move. The breach below the 100-day moving average signified prevailing bearish sentiment. However, amidst oversold RSI conditions, the pair found a lifeline at the 0.59394 support level, staving off further downward pressure.
A subsequent resurgence of bullish sentiment sparked a retracement, with the pair retracing up to the 50% Fibonacci Retracement level. The fate of the 50% level as an intermediate resistance pivot will be crucial. Should it absorb upside pressures, a retest of the 0.59394 support level may be in the cards, contingent upon the emergence of selling pressures. Conversely, a breakout above the 50% level, especially on high volume, could herald further upward momentum, potentially targeting the 61.80% Golden Ratio.
Summary
As the NZDUSD braces for U.S. inflation data, the pair remains in a downtrend below the 100-day moving average. Resistance at 0.62166 looms large, while support at 0.59394 holds crucial. A breakout above the 50% Fibonacci level could signal further gains, contingent on market sentiment amid evolving monetary policy dynamics.
Sources: Reserve Bank of New Zealand, CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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