Currency Pair: Bearish NZD/USD
Expertise: Technical
Average Time Frame: Six Weeks
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The New Zealand Dollar’s downtrend against its US cousin may have become a little shallower than it used to but, but downtrend it remains and it's not likely to reverse anytime soon.
The US Dollar has seen a little rethink of the broad strength seen in the last three months or so but remains firmly in the ascendant. And, while the US Federal Reserve is expected to raise interest rates next month, and to do so at least once more this year, the Reserve Bank of New Zealand is rather more stuck when it comes to monetary policy.
It has recently revised its outlook for inflation and growth a bit lower, with the knock-on possibility that the Official Cash Rate will remain at its 1.75% record low for quite some time yet.
Technically NZD/USD has retraced nearly of its rise up from the lows of November last year to the peaks of February 2018.
In recent days it has slipped below the 76.4% Fibonacci retracement of that climb. It came in at 0.6934.
Now 100% retracement beckons, at 0.67794. With nothing very likely to disturb the weak NZ inflation picture in the next couple of months or so, or at least not to the extent that might force an early RBNZ rethink it seems all-but certain that NZD/USD will slip as far as that level, even if it doesn’t do so very rapidly.
Risks to this possibility will probably come from any signs of further US Dollar weakness, but they’re not yet likely to be sustained enough to prevent NZD/USD from hitting that target.
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--- Written by David Cottle, DailyFX Research
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