- NZD/USD is trading sharply higher on Monday, with the pair up 0.6% to hit 0.6965.
- The pair has ignored the Russo-Ukrainian pessimism and the Fed’s recent hawkish line speech after bouncing off its 200 DMA.
- Now eyeing a test of recent highs at 0.7000, helped by buoyant equity markets.
The NZD/USD trades strongly higher on Monday, with the pair jumping 0.6% to 0.6965 after finding solid early session demand at the 200-day moving average just above 0.6950. The Fed’s hawkish line comment over the weekend hinting at faster rate hikes (in 50bp intervals) and an impending quarter, as well as a deterioration in the tone of Russo-Ukrainian developments after evidence emerged of widespread atrocities committed by the Russian military in northern Ukraine, failed to dent risk appetite in the FX space.
Indeed, while the mounting body of evidence of war crimes committed by Russian troops against Ukrainian civilians casts a dark cloud over the Russia-Ukraine peace talks, global stock markets are trading firmly on the front foot. This is giving companies like the risk-sensitive kiwi and its other risk-sensitive G10 pairs a boost, but the New Zealand dollar is also gaining (along with the AUD) as a result of its exposure to commodity prices, which again they are vastly higher.
In recent weeks, commodity-sensitive G10 currencies such as the kiwi have been in demand, despite heightened risk appetite, given expectations that countries such as New Zealand and Australia, which are located geographically far Ukraine, will benefit from structurally higher commodity prices as a result of the war. Looking at NZD/USD from a technical point of view, the pair appears to continue in the pattern of posting higher highs and higher lows that has been in play since the end of January.
The fact that the pair found such strong support at its 200 DMA on Monday will be taken as a bullish technical signal and makes it likely that recent yearly highs in the 0.7000 area will be tested this week. A break above 0.7000 could potentially open the door for a move towards Q4 2021 highs in the 0.7200 area. As long as the risk/commodity environment remains supportive and the RBNZ is ahead of the Fed in terms of tightening monetary policy, a push at these levels is definitely in the cards.
Additional technical levels
Source: Fx Street
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
