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NZD/USD Bolstered on Bitcoin Leading Sentiment Recovery, RBNZ in View

NZD/USD Bolstered on Bitcoin Leading Sentiment Recovery, RBNZ in View

Thomas Westwater, Analyst

NZD/USD, New Zealand Dollar, Bitcoin, Elon Musk, RBNZ -Talking Points

  • Asia-Pacific markets look to open higher as market sentiment recovers
  • Bitcoin pushes higher with tech stocks as Ray Dalio gives nod to Bitcoin
  • NZD/USD is attempting to recapture trendline support as it moves higher

Tuesday’s Asia-Pacific Outlook

Asia-Pacific stocks appear set to open higher on the back of an upbeat Monday session on Wall Street. Technology stocks lead gains, reflecting investors’ increased appetite to take on risk after several Fed speakers casted doubt on rising prices being anything more than a pandemic-induced temporary effect. The safe-haven US Dollar dropped.

US Treasury yields dropped along the curve, except for the 2-year rate, following some weak economic data prints to start the week. The Chicago Fed National Activity Index (CFNAI) dropped to +0.24 for April, down from March’s read of +1.71. The benchmark 10-year yield fell over 1%, reflecting easing expectations for the Federal Reserve to cut bond purchases in the near term as surging commodity prices fueled inflationary fears.

Elsewhere, the cryptocurrency market bounced back after a volatile week as broader market sentiment improved. Moreover, Bridgewater Associates found Ray Dalio advocated for Bitcoin saying, “personally, I’d rather have Bitcoin than the bond (Treasury). The hedge fund titan sent Bitcoin supporters on social media into overdrive to spread Mr. Dalio’s praises. BTC/USD rose more than 10% through the last 24 hours.

However, it was once again Elon Musk that drove traders back into a buying frenzy after the Tesla CEO tweeted that he is discussing ways to increase the renewability of cryptos with North American Bitcoin minders. BTC/USD rose more than 10% through the last 24 hours.

Focus now shifts to this week’s Reserve Bank of New Zealand interest rate decision when analysts expect the central bank to hold its overnight Cash Rate (OCR) steady at 0.25%. A hawkish tilt in language, however, may drive strength in NZD. There is some doubt that ongoing border restrictions may throttle growth in the coming months.

The central bank’s Large-Scale Asset Purchase Programme (LSAP) is likely to be a key focus. The LSAP programme is already in a tapering trajectory, but an increase will likely be seen as a further tightening of policy. Several factors – including travel, vaccines, and supply-side constraints – are causing a great amount of uncertainty, however, and it is unlikely that the RBNZ will take significant steps to tighten at this week’s meeting.

NZD/USD Technical Breakdown

NZD/USD’s recently broken trendline is back in focus following the overnight move higher. The currency pair is also now against its 20-day Simple Moving Average (SMA). If price manages to break back above trendline resistance (green line), it will likely renew optimism and perhaps lead to higher highs. Alternatively, a move lower would look for support at the 61.8% Fibonacci retracement level and the 50-day SMA.

NZD/USD Daily Chart

NZDUSD

Chart created with TradingView

New Zealand Dollar TRADING RESOURCES

--- Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwateron Twitter

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

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