NZD/USD Price Analysis: Sticks to modest recovery gains above 0.6100, lacks follow-through

• NZD/USD has staged a modest recovery from levels below 0.6100, ie above a two-year low.
• Sustained dollar buying and a risk-off mood capped gains in the risk-sensitive kiwi.
• In addition, investors were hesitant ahead of Wednesday’s RBNZ and US CPI.

The pair NZD/USD showed resistance below 0.6100 and gained some positive traction on Tuesday. The rally helped spot prices recover some of the previous day’s sharp drop to the lowest level since May 2020, although there was no follow-up buying.

The incessant buying of US dollars continued amid expectations that the Fed will maintain its aggressive tightening policy. Aside from this, the prevailing risk environment, fueled by rising recession fears, pushed the safe-haven dollar to a new 20-year high and acted as a headwind for the risk-sensitive kiwi.

Generally speaking, the NZD/USD pair has been moving down along a descending channel for the past four weeks. This points to a well-established short-term downtrend and supports the prospects for a further depreciation move in the NZD/USD pair. However, traders were wary of the risk of key events/data this week.

The Reserve Bank of New Zealand (RBNZ) is scheduled to announce its monetary policy decision during the Asian session on Wednesday. Aside from this, market attention will remain focused on the latest US consumer inflation figures, which will influence short-term dollar price dynamics and provide a further directional boost to the NZD/USD pair.

From current levels, any further drop below 0.6100 is likely to find some support near the lower end of the mentioned channel, currently around the 0.6065-0.6060 region. A convincing break below would be seen as a new trigger for bearish traders and make the NZD/USD pair vulnerable to testing the key psychological 0.6000 level.

On the other hand, the push beyond the 0.6125-0.6130 region, or the daily high, could face some resistance near the 0.6180 area ahead of 0.6200. The latter coincides with the resistance of the descending channel and is closely followed by the 100-period SMA on the 4-hour chart, currently in the 0.6230-0.6235 area.

A sustained break of these barriers would suggest that the NZD/USD pair has formed a short-term bottom and trigger a short-covering move. The bulls could then try to reclaim the 0.6300 level and lift the pair towards the next relevant resistance near the 0.6325 offer zone.

NZD/USD 4-hour chart

Technical levels