The New Zealand dollar continued to weaken against the greenback, with the NZD/USD slipping below the 20-Day moving average this week following the drop in risk appetite, and the pair may continue to retrace the advance from May as investors weigh the outlook for a global recovery.
Currency Pair: NZD/USD
Chart: 60 Min Charts
Short-Term Bias: Flat
Analysis
The New Zealand dollar continued to weaken against the greenback, with the NZD/USD slipping below the 20-Day moving average this week following the drop in risk appetite, and the pair may continue to retrace the advance from May as investors weigh the outlook for a global recovery. However, as market participants speculate the Reserve Bank of New Zealand to keep rates on hold and tighten policy over the next 12 months, long-term expectations for higher interest rates could lead the kiwi-dollar higher over the near-term. After reaching a high of 0.7220 in August, the NZD/USD slipped to a low of 0.4894 in March as traders curbed their appetite for high risk/reward investments but nevertheless, the rebound in market sentiment paired with projections for higher borrowing costs may continue to drive the exchange rate higher as the central bank attempts to put a floor on the interest rate. Over the next few hours of trading, risk trends are likely to drive price action for the kiwi-dollar as the economic calendar remains light, and the rise in global equities paired with the rebound in commodity prices could lead the pair to push back above 0.6320-30 (61.8% Fib) to retrace the sell-off from earlier this week. At the same time, equity futures foreshadow a lower open for the U.S. market, and expectations for a drop in American securities could weigh on the NZD/USD and the reserve currency continues to benefit from safe-haven flows. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
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