- Expectations of a RBNZ rate hike provided a strong boost to the NZD / USD on Tuesday.
- Diminished hopes of a tightening of past monetary policies by the Fed weigh on the dollar.
- The scenario looks set for a move towards the test of the 100-day SMA, near 0.7150.
The pair NZD / USD has jumped to nearly three-week highs at the start of the European session on Tuesday, with the bulls now looking to take advantage of the momentum above the 0.7100 level.
After the subdued and limited price action within a range of the previous day, the NZD / USD pair has captured some aggressive trading on Tuesday and has been supported by a combination of factors. The investors they have advanced their expectations of a rate hike by the RBNZ after a business survey in New Zealand showed a strong improvement in confidence. This, in turn, has been seen as a key factor that has provided a strong boost to the NZD.
On the other hand, the US dollar has been on the defensive amid easing fears of an earlier-than-expected tightening of monetary policies by the Fed. An unexpected rise in the unemployment rate in the United States It overshadowed the big pace in the NFP headline and suggested that the Fed will wait before reducing its asset purchases. Therefore, the market focus will remain on Wednesday’s release of the minutes of the last FOMC meeting.
It is worth remembering that the Fed surprised investors at the end of the June meeting and advanced its schedule for the first interest rate hike after the pandemic. The minutes will now be examined looking for new clues about the Fed’s monetary policy outlook. This will play a key role in the USD price action in the short term and will help investors determine the next directional move for the NZD / USD pair.
Meanwhile, the strong momentum on Tuesday could be attributed to some technical buying after a sustained move above the very important 200-day SMA. With the latest move up, the NZD / USD pair has now risen more than 150 pips from the pre-NFP lows just below 0.6950 and looks set to extend its rally. Therefore, some continuation force towards the 100-day SMA, around 0.7150, seems like a clear possibility.
Market participants are now looking forward to the US economic calendar, featuring the ISM services PMI release. The data could influence USD price dynamics and generate some short-term opportunities around the NZD / USD pair at the start of the American session.
NZD / USD technical levels