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NZD/USD bulls move in and aim to break above 0.6365

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  • The NZD/USD pair could be heading for a deeper bullish correction if it breaks above the 0.6365 area.
  • If the bulls hold strong, we will close in the green for the second day in a row, which would put the directional bias in favor of the longs.

The pair NZD/USD It rose on the day with the US dollar still under pressure despite the hawkish tone of the Federal Reserve regarding the recent non-farm payrolls data. Federal Reserve Chairman Jerome Powell said in remarks today at the Economic Club of Washington, D.C. signing event that he expects 2023 to be a year of significant declines in inflation.

The US dollar fell during the series of comments that gave something to both bulls and bears. However, the dollar rallied as investors digested some of the more hawkish tones. Powell explained that the “base case is that it will take time and more rate hikes to finish the process.”

However, the dollar is technically still in retreat and high beta currencies like the Kiwi have enjoyed a rebound in US equities on Tuesday after a series of down days since the NFP report. The US economy added 517,000 jobs in January, the most since July and well above market expectations of 185,000. Following the data release on Friday, the ISM for services also pointed to strength in the services sector, raising concerns about persistent inflation and bolstering the case for further rate hikes.

Meanwhile, the latest national data showed New Zealand’s unemployment rate rising to 3.4% in Q4 2022 from 3.3% in Q3, reinforcing bets that the central bank will take a less aggressive stance. New Zealand annual inflation also came in below the Reserve Bank of New Zealand’s forecast of 7.5%, and investors now expect the RBNZ to ease policy to a 50 basis point rate hike in February, following the record 75 basis point increase recorded in November.

As for the direction of the Ave, ANZ Bank analysts wrote in a note on Wednesday that they were improving their forecasts for the NZD: “We now see it reaching 0.65 in Q3, 0.67 in Q4 and 0.68 in Q4 of the year. coming”.

NZD/USD Technical Analysis

The NZD/USD pair could be heading for a bullish correction as it closed in the green on Monday, with prospects for a move into short positions from Friday’s sell-off. We have a double bottom below last week’s lows and the bulls are moving into those lows around 0.6320.

If the bulls hold strong, we will close in the green for the second day in a row, putting the directional bias in favor of the longs for the sessions ahead. A measured move to 100% of the current consolidation range has a confluence with the 38.2% Fibonacci near 0.6390. A break of 0.6400 opens the risk of a move to 0.6425 on a 50% mean reversal to near the previous Jan 31 lows. However, 0.6365 has to give first as the previous support structure from Jan 19.

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Source: Fx Street

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