The Kiwi dollar breached the 0.5700 mark on Friday, gaining more than 0.22% against the greenback after hitting a daily low of 0.5689. At the time of writing, NZD/USD is trading at 0.5709.
NZD/USD Price Forecast: Technical Outlook
NZD/USD remains technically bearish, even though interest rate prospects suggest the Reserve Bank of New Zealand could raise rates at least twice. However, in the short term, the leg up will test the support-trendline-based resistance at around 0.5750.
The Relative Strength Index (RSI) is rising, suggesting buyers are gaining traction, but remains below the 50-neutral level. Therefore, the overall trend is downwards.
For a bullish reversal, NZD/USD needs to overcome 0.5750, followed by the 0.5800 mark. Above this level, the next resistance is the 200-day simple moving average (SMA) at 0.5821, followed by the 50-day SMA at 0.5831 and then the 100-day SMA at 0.5851. Once those levels are cleared, the next resistance is the 0.5900 milestone.
On the other hand, if NZD/USD falls below the day’s current low (LOD) at 0.5689, the next support lies at 0.5650, followed by 0.5600.
NZD/USD Price Chart – Technical Outlook
New Zealand Dollar FAQ
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known trading currency among investors. Its value is largely determined by the health of New Zealand’s economy and the country’s central bank policy. Nevertheless, there are some unique characteristics that may propel NZD forward. The performance of the Chinese economy affects Kiwis as China is New Zealand’s largest trading partner. Bad news for the Chinese economy means New Zealand’s exports to the country will be reduced, hurting the economy and thus its currency. Another factor influencing the NZD is dairy prices as the dairy industry is New Zealand’s main export. Higher dairy prices boost export earnings, thereby contributing positively to the economy and thus the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus on keeping it near the 2% mid-point. For this purpose, the bank sets a reasonable level of interest rates. When inflation is too high, the RBNZ will raise interest rates to cool the economy, but this move will also push bond yields higher, increasing the appeal of investors to invest in the country and thus boosting the NZD. Conversely, low interest rates weaken the NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be from rates set by the US Federal Reserve, could also play an important role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are important to assess the state of the economy and can impact the valuation of the New Zealand Dollar (NZD). A strong economy based on high economic growth, low unemployment and high confidence is good for NZD. Higher economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to raise interest rates if this economic strength is accompanied by increased inflation. Conversely, if economic data is weak, the NZD is likely to depreciate.
The New Zealand dollar (NZD) strengthens during risk-on periods, or when investors feel broader market risks are low and are optimistic about growth. This leads to a more favorable outlook for commodities and so-called ‘commodity currencies’ like the Kiwi. Conversely, in times of market turmoil or economic uncertainty the NZD weakens as investors sell higher-risk assets and flee to more stable safe havens.
