The Kiwi has been down for more than two months, as commodity dollars have displayed weakness against the USD. China’s economy has been displaying significant deterioration in numerous areas, albeit some recovery in recent weeks. As a result, risk sentiment has been mostly negative. In contrast, the US economy has shown resiliency, with employment reports released last week continuing to display strength, indicating that the labor market is in good health.
On the daily chart, the NZD/USD fell below the major level of 0.60, where it had acted as support earlier for this pair. The decline continued below 0.59, although during September the price traded mostly sideways for this pair. The 0.60 level turned into resistance although NZD/USD peaked above it occasionally.
Earlier the Reserve Bank of New Zealand (RBNZ) issued its policy decision, deciding to keep the cash rate constant at 5.50%, as expected, and provided no new hints that interest rates would be raised again, which means that they will have to go down at some point.
This, in turn, implies that the RBNZ may have completed the rate-hiking cycle, undermining the New Zealand Dollar (NZD), which, combined with a stronger US Dollar (USD), put pressure on the NZD/USD. This pair attracted some intraday selling and fell to a near four-week low, around 0.5870 by the middle of last week, helped by the jump in the US JOLTS job opening, which increased above 9 million again.
Although this pair formed a doji candlestick on Thursday last week which is a bullish reversing signal and in the last three trading days we have seen three strong bullish candlesticks. The price has climbed above the 0.60 level, pushing above the 50 SMA (yellow) as well as the USD retreats, following a strong bullish momentum that has lasted more than two months. Although the trend still remains bullish for the USD index DXY and this retrace is coming to an end and fundamentals haven’t changed, so I don’t think NZD buyers can keep this buying momentum up much longer.
NZD/USD
