- NZD/USD soars to near 0.6030 as market sentiment favors risky assets.
- The RBNZ surprisingly announced an interest rate cut by 25 bps on Wednesday.
- Firm Fed rate-cut prospects keep the US Dollar’s upside limited.
The NZD/USD pair surges to near 0.6030 in Friday’s European session. The Kiwi asset strengthens as appeal for risky assets has improved. Market sentiment improves significantly as fears of the United States (US) entering a recession have ebbed on upbeat Retail Sales for July and lower weekly Jobless Claims in the week ending August 9.
S&P 500 futures have posted decent gains in European trading hours, demonstrating an improvement in investors’ risk-appetite. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls to near 102.80.
However, the near-term appeal of the New Zealand Dollar (NZD) remains uncertain as the Reserve Bank of New Zealand (RBNZ) unexpectedly reduced its Official Cash Rate (OCR) by 25 basis points (bps) to 5.25% on Wednesday.
Meanwhile, the next move in the US Dollar will be guided by the market speculation for the Federal Reserve (Fed) interest rate cut path for the entire year. For that, investors await Fed Chair Jerome Powell’s speech at the upcoming Jackson Hole (JH) symposium, which will be held from August 22-24.
NZD/USD trades in a Symmetrical Triangle chart pattern on a daily timeframe, which exhibits a sharp volatility contraction. The Kiwi asset rises above the 20-day Exponential Moving Average (EMA) near 0.6000, suggesting that the near-term trend is bullish.
The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, indicating indecisiveness among market participants.
More upside would appear if the asset decisively breaks May 3 high at 0.6046. This would push the asset higher to July 17 high near 0.6100 and July 12 high of 0.6127.
In an alternate scenario, a downside move below April 19 low around 0.5850 would drag the asset towards the round-level support of 0.5800, followed by 26 October 2023 low at 0.5770.
NZD/USD daily chart
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays in positive territory near 1.1000, looks to post weekly gains
![EUR/USD stays in positive territory near 1.1000, looks to post weekly gains](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/EURUSD/colorful-euro-banknotes-3397150_XtraSmall.jpg)
EUR/USD trades modestly higher on the day at around 1.1000 in the American session on Friday. Although the cautious market stance limits the upside, the pair remains on track to post its highest weekly close of 2024.
GBP/USD climbs to multi-week highs above 1.2900
![GBP/USD climbs to multi-week highs above 1.2900](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/GBPUSD/iStock-170160529_XtraSmall.jpg)
GBP/USD trades at its highest level in three weeks at around 1.2900 in the American session on Friday. The bearish opening seen in Wall Street points to a negative tilt in risk mood and makes it difficult for the pair to gather further bullish momentum.
Gold retreats after setting a new record high of $2,500
![Gold retreats after setting a new record high of $2,500](https://editorial.fxstreet.com/images/Markets/Commodities/Metals/Gold/stacked-gold-bars-13094022_XtraSmall.jpg)
Gold stages a technical correction and trades below $2,490 after setting a new record high of $2,500 earlier in the day, boosted by falling US Treasury bond yields. Profit-taking could ramp up the volatility heading into the weekend.
Dogecoin price is set for a downturn as it encounters its resistance barrier
![Dogecoin price is set for a downturn as it encounters its resistance barrier](https://editorial.fxstreet.com/images/Markets/Currencies/Cryptocurrencies/Dogecoin/Doge_Coin_31_02_XtraSmall.jpg)
Dogecoin price is testing the resistance around the 100-day EMA at $0.1073, with an impending decline ahead. On-chain data shows DOGE's daily active addresses decreasing and dormant wallets moving again, signaling a bearish move.
Easing inflation worries despite robust sales data
![Easing inflation worries despite robust sales data](https://editorial.fxstreet.com/images/Macroeconomics/EconomicIndicator/Prices/Inflation/inflation-80587109_XtraSmall.jpg)
The market mood got a further boost yesterday after the latest data release from he US hinted that the economy is not doing that bad, after all.