The combination of a negative consumer outlook indicating pessimism and prolonged economic stagnation in New Zealand, paired with a more hawkish than expected Federal Open Market Committee (FOMC) decision, which revealed the Fed's projection of only one interest rate cut for this year, despite the soft US Consumer Price Index (CPI) report, exerted downward pressure on the NZDUSD.
Overview
The combination of a negative consumer outlook indicating pessimism and prolonged economic stagnation in New Zealand, paired with a more hawkish than expected Federal Open Market Committee (FOMC) decision, which revealed the Fed's projection of only one interest rate cut for this year, despite the soft US Consumer Price Index (CPI) report, exerted downward pressure on the NZDUSD. This caused the currency pair to approach the dynamic support level provided by the 50-period Exponential Moving Average. Traders are expected to closely monitor the currency pair in light of the forthcoming release of significant economic data that could potentially impact currency valuations.
High Impact Economic Events
Tuesday 12:30 pm (GMT+0): Core Retail Sales m/m (USD)
Tuesday 12:30 pm (GMT+0): Retail Sales m/m (USD)
Wednesday 06:00 am (GMT+0): CPI y/y (GBP)
Wednesday 10:45 pm (GMT+0): GDP q/q (NZD)
Thursday 07:30 am (GMT+0): SNB Policy Rate (CHF)
Thursday 11:00 am (GMT+0): Official Bank Rate (GBP)
Thursday 12:30 pm (GMT+0): Unemployment Claims (USD)
Friday 06:00 am (GMT+0): Retail Sales m/m (GBP)
Friday 07:15 am (GMT+0): French Flash Manufacturing PMI (EUR)
Friday 07:15 am (GMT+0): French Flash Services PMI (EUR)
Friday 07:30 am (GMT+0): German Flash Manufacturing PMI (EUR)
Friday 07:30 am (GMT+0): German Flash Services PMI (EUR)
Friday 08:30 am (GMT+0): Flash Manufacturing PMI (GBP)
Friday 08:30 am (GMT+0): Flash Services PMI (GBP)
Friday 01:45 pm (GMT+0): Flash Manufacturing PMI (USD)
Friday 01:45 pm (GMT+0): Flash Services PMI (USD)
Technical Analysis
The NZDUSD bounced off the support level of 0.58520 on April 4 to follow a pattern of higher peaks and higher troughs, reaching an all-time high price of 2024 at 0.62219. The high prices attracted bearish traders who entered the market with short positions, causing the exchange rate to drop to the dynamic support of the 50-period Exponential Moving Average (EMA) and close to the key support level of 0.60994. A decisive breach of 0.60994 will indicate an end to the current uptrend and the start of a downward trend. As long as the price remains above the 0.60994 level, the Kiwi remains in an uptrend.
Conflicting signals are being demonstrated by the 50-period EMA and the Momentum oscillator. Specifically, prices are above the EMA while the Momentum oscillator registers values below the 100 baseline. Upon closer examination, the presence of a negative divergence between the price and the oscillator indicates a potential correction to the downside.
Potential Upside Targets
If the bulls manage to keep control of the NZDUSD market, traders may consider the following three potential upside targets:
0.61544: The initial upside target is 0.61544, aligning with the Pivot Point resistance calculated using the weekly Pivot Point method.
0.62219: The second price objective is 0.62219, representing the 2024 all-time high that reached June 12.
0.62769: The third upside target is 0.62769, corresponding to the R3 resistance level estimated using the weekly Pivot Point calculation.
Potential Downside Targets
If the bears manage to take control of the market, traders may find potential opportunities in the following four downside targets:
0.60994: The initial support level is 0.60994, corresponding to the trough marked on June 9.
0.60237: The second price objective is 0.60237, aligning with the 161.8 percent Fibonacci Extension drawn from the trough at 0.60237 to the peak at 0.62219.
0.59693: The third potential downside target is estimated at 0.59693, representing the S3 support level of the weekly Pivot Points.
0.59012: An additional potential downside target is estimated at 0.59012, representing the 261.8 percent Fibonacci Extension drawn from the swing low of 0.60237 to the swing high of 0.62219.
Fundamentals
The most recent data indicate that the New Zealand economy has demonstrated a mild retraction, with real GDP declining by approximately 0.7% since reaching its peak in Q3 2022. This trajectory has been in line with the expectations of the Reserve Bank. Nonetheless, it has posed challenges for businesses and households unaccustomed to prolonged periods of economic stagnation.
Conclusion
The upcoming release, later today, of the change in the total sales value at the retail level is anticipated to provide insights into the potential impact on the NZDUSD direction. The New Zealand dollar has retreated from its peak prices this year, and a decisive breach of 0.60994 is likely to pave the way for a downward correction. The current economic stagnation in New Zealand suggests that exchange rates may decline even further. To navigate this volatile market, traders must stay on top of economic events and geopolitical changes so they can make informed trading decisions.