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NZD/USD Outlook Mired by Negative Slope in 50-Day SMA

NZD/USD Outlook Mired by Negative Slope in 50-Day SMA

David Song,

NZD/USD appears to be stuck in a narrow range after clearing the June 2020 low (0.6185), but the exchange rate may face a further decline in the second half of 2022 with the Federal Reserve on track to normalize monetary policy faster than its New Zealand counterpart.

In turn, the rebound from the yearly low (0.6124) may turn out to be a correction in the broader trend as NZD/USD appears to be tracking the negative slope in the 50-Day SMA (0.6352), and the exchange rate may fall towards the May 2020 low (0.5921) as the commodity bloc currencies struggle to hold their ground against the Greenback.

NZD/USD Rate Daily Chart

Image of NZD/USD rate daily chart

Source: Trading View

NZD/USD consolidates after trading to a fresh yearly low (0.6124) earlier this week, and the exchange rate may trade within a defined range as the Relative Strength Index (RSI) holds above oversold territory.

The move above 0.6170 (50% expansion) may push NZD/USD back towards the 0.6230 (61.8% retracement) to 0.6260 (38.2% expansion) region, with the next area of interest coming in around 0.6350 (100% expansion), which lines up with the 50-Day SMA (0.6352).

However, NZD/USD may continue to track the negative slope in the moving average if it fails to clear the opening range for July, and lack of momentum to hold above the 0.6170 (50% expansion) may spur another run at the 0.6070 (61.8% expansion) area as it trades to a fresh yearly lows in the second half of 2022.

With that said, a decline in NZD/USD may push the RSI into oversold territory for the fourth time in 2022, and a move below 30 in the oscillator may bring the 0.5900 (78.6% retracement) to 0.5930 (78.6% expansion) region on the radar, which lines up with the May 2020 low (0.5921).

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.