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New Zealand Dollar Price Outlook: NZD/USD and AUD/NZD Levels Ahead of RBNZ

New Zealand Dollar Price Outlook: NZD/USD and AUD/NZD Levels Ahead of RBNZ

2020-02-10 22:30:00
Peter Hanks, Junior Analyst
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New Zealand Dollar Forecast:

  • NZD/USD trades in oversold territory after falling precipitously to start 2020
  • Conversely, AUD/NZD has seen little progress in 2020 despite notable swings in either direction
  • IG Client Sentiment Data reveals retail traders are confident the Kiwi can outperform the US Dollar, potentially suggesting further NZD losses

NZD/USD Price Outlook

The New Zealand Dollar has been a victim of the economic impact of coronavirus as commodities and commodity-linked currencies suffer alongside a pullback in China’s growth forecasts. In turn, NZD/USD has slipped considerably to start the year. Now the pair trades in oversold territory and nearby support could help buoy the Kiwi in the days ahead.

NZD/USD Price Chart: Daily Time Frame (January 2019 – February 2020)

nzd/usd price chart ahead of rbnz

To that end, NZD/USD may look to the 0.6340 to 0.6324 range for assistance in stalling further declines. Should Kiwi strength emerge, early hurdles may exist at 0.6430 and 0.6480 to 0.6500. While the former failed to offer support last week, it has shown an ability to influence price in the past.

NZD/USD MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 15% 17% 16%
Weekly 6% -20% -3%
What does it mean for price action?
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On the other hand, 0.6480 to 0.6500 includes the 200-day moving average and a horizontal band of resistance that will look to stave off a greater recovery. That being said, IG Client Sentiment Data reveals retail traders are confident NZD/USD strength could emerge soon which may suggest the pair could fall further since we typically take a contrarian view to IGCS Data.

AUD/NZD Price Outlook

While NZD/USD has suffered a string of losses, price action on AUD/NZD has been addled, resulting in relatively little progress for the pair in either direction. While the Australian Dollar has suffered against other pairs during the coronavirus outbreak - likely due to its correlation with economic growth in China – AUD/NZD is trading in positive territory for the year and is in the midst of a multi-day rally that has seen it surpass resistance.

AUD/NZD Price Chart: Daily Time Frame (August 2018 – February 2020)

aud/nzd daily price chart ahead of rbnz

Consequently, the pair stands on the precipice of overbought territory. Since both the AUD and NZD are sensitive to market mood swings, a continuation in AUD/NZD strength could suggest the market views the Reserve Bank of New Zealand as the more dovish of the two central banks, thus resulting in a weaker NZD. As it stands, topside resistance should reside around 1.0554 and will look to stall a continuation higher.

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Either way, investors will enjoy clarification on the central bank’s policy path Tuesday when the RBNZ is slated to decide on its Official Cash Rate. At present, no change to the OCR is expected,but any indication the bank will act to lower rates sooner than originally anticipated could spark further NZD losses versus the US and Australian Dollars. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

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

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