The New Zealand dollar is on the slide as antipodean currencies remain under pressure as sentiment weakens towards countries with series trade exposure to China as pessimism sets in towards the economic environment.
Much of the weakness we are seeing in the NZDUSD pair is due to the expectation that the Fed are going to continue to hike rates. Traders are also ignoring the recent RBNZ rate hike.
According to Westpac “Recent developments have seen the NZDUSD pull back to around $0.62. They also noted that “However, we anticipate that this move in currencies is likely to prove temporary and that recent trends will reassert themselves over the course of the year.”
The research comes at a time of New Zealand Dollar weakness that leaves it the biggest loser amongst the Group-of-10 major currencies over the course of the past month.
On the jobs market Westpac says, “US labour market data, in particular, was strong over January and this saw risk aversion increase in currency markets, with investors favouring the US dollar again.”
Overall, the NZDUSD pair is still not showing signs of a price bottom. However, we really need to see the US dollar index topping out, with sure confirmation before we get too excited.
According to the ActivTrader market sentiment tool some 70 percent of traders are bullish towards the NZDUSD pair. As we typically look to fade sentiment biases, this could mean the NZDUSD pair could start to reverse lower.
It is worth mentioning that high levels of bullish sentiment suggest a classic contrarian sentiment trade is still in the making, so do be careful buying this pair at current level, especially since the recent rejection from the 0.6300 area.
NZDUSD Short-Term Technical Analysis
The four-hour time frame a shows that a bearish bias is play as the NZDUSD pair has repeatedly struggled to move above its 200-period moving average.
Moreover, the downside may not be over as bearish Momentum price divergence is also seen down towards the 0.5900 support area which has yet to be reversed.
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NZDUSD Medium-Term Technical Analysis
The daily time frame shows that the pair looks to be undergoing a major trend test of its 200-day moving average. So far this key moving average is holding.
According to technical analysis we could see more upside likely while the NZDUSD pair defend this key metric, however, a move under the 200-day moving average could prompt a decline towards the 0.5800 area.
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