NZD/USD Bearish Momentum Persists – Capital Street FX
NZD/USD drops to its lowest level since May 14, with bears anticipating a sustained move below the 0.6000 mark
FUNDAMENTAL OVERVIEW:
- NZD/USD declines for the third consecutive day, reaching a two-month low.
- Expectations of an early RBNZ rate cut and China’s economic troubles continue to pressure the Kiwi.
- Meanwhile, dovish Fed expectations and U.S. political developments weaken the USD, offering some support to the pair.
The NZD/USD pair attracts new sellers after an uptick to the 0.6025-0.6030 range during the Asian session, turning lower for the third consecutive day on Monday. This marks the fifth negative move in the past six days, bringing spot prices to their lowest level since May 14. Bears are now waiting for a break below the 0.6000 psychological mark to position for further losses.
The New Zealand Dollar (NZD) continues to underperform amid expectations that the Reserve Bank of New Zealand (RBNZ) will cut interest rates soon following last week’s weak CPI report. Additionally, concerns over a slowdown in China – the world’s second-largest economy – are reducing demand for antipodean currencies, including the Kiwi, contributing to the bearish tone surrounding the NZD/USD pair.
The US Dollar (USD) encounters fresh supply at the start of the week due to weekend political developments and dovish Federal Reserve (Fed) expectations. President Joe Biden’s withdrawal from the presidential race on Sunday leads investors to unwind trades betting on a Trump victory. Additionally, markets have fully priced in a Fed rate cut for the September policy meeting.
Investors also expect the US central bank to lower borrowing costs two more times by the end of the year. This keeps USD bulls on the defensive and helps limit the downside for the NZD/USD pair. In the absence of significant economic releases from the US, the mixed fundamental backdrop suggests caution, making it wise to wait for some follow-through selling before placing new bearish bets on the pair.
NZD/USD TECHNICAL ANALYSIS DAILY CHART:
Technical Overview:
NZD/USD is trading within a down channel.
NZD/USD is moving below all the Moving Averages (SMA).
The Relative Strength Index (RSI) is in the Oversold Zone, while the Stochastic oscillator suggests a Negative trend.
Immediate Resistance level: 0.6004
Immediate support level: 0.5976
HOW TO TRADE NZD/USD
NZD/USD experienced an upward movement initially, but subsequently encountered resistance, forming a double-top pattern. This price rejection led to a sharp decline in the currency pair. Although there was a subsequent attempt by the NZD/USD to recover and move higher, it was unable to sustain the upward momentum and fell precipitously.
Currently, the NZD/USD is in an oversold condition and is trading near a crucial support level. If this support level holds and is respected by the market, there is a possibility of a rebound and subsequent upward price movement in the NZD/USD.