- NZD/USD rebounds from 0.5860 as US Dollar retreats.
- Investors believe that the RBNZ will begin reducing interest rates from November.
- The NZD is trading within the descending triangle pattern, suggesting indecision among investors.
The NZD/USD pair turns sideways slightly below 0.5900 in the European session on Friday, after recovering strongly from the crucial support of 0.5860.
NZD/USD rebounds as the appeal of risk currencies strengthens after economists warned of persistent global inflation. This has increased speculation that central banks other than the Federal Reserve (Fed) will also delay their rate cut plans to prevent inflation from picking up again. Initially, the Fed was only expected to begin cutting interest rates later this year due to persistent upward price pressure and robust labor demand.
Investors see the Reserve Bank of New Zealand (RBNZ) pivoting towards rate cuts from November, after first quarter inflation data in NZ rose in line with estimates. Price pressures rose an estimated 0.6%, up from the previous reading of 0.5%.
The US Dollar Index (DXY) falls slightly to 106.10. The near-term outlook remains strong, as the Federal Reserve (Fed) believes that interest rates will remain rising long enough for inflation to sustainably return to the required rate of 2%. Currently, traders see the Fed starting to cut interest rates starting at the September meeting.
The NZD/USD pair oscillates in a descending triangle chart pattern, showing a sharp contraction in volatility. The descending edge of the mentioned chart pattern is drawn from the April 12 high near 0.6000, while horizontal support lies from the April 16 low at 0.5860.
NZD/USD is attempting to break above the 20-period EMA, which is trading around 0.5900.
The 14-period RSI recovers strongly above 40.00. However, the bearish bias remains favorable until the RSI breaks above 60.00.
Further declines would occur if NZD/USD breaks below the April 16 low at 0.5860. This would drag the asset towards the September 8, 2023 low at 0.5847, followed by the round support level of 0.5900.
On the other hand, a recovery move above the March 18 high at 0.6100 will take the pair towards the March 12 low at 0.6135. Breaking this last level will push the asset towards the February 9 high around 0.6160.
NZD/USD hourly chart
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
