- NZD/USD has risen above 0.6800 on the back of softer-than-expected post-CPI US dollar profit-taking.
- Short-term bulls are looking at a test of the recent lows and the 21-200 DMA at 0.6900.
- The focus has now turned to the RBNZ meeting on Wednesday.
After finding strong support above the 0.6800 level and its 50-day moving average just below it earlier in the session, the NZD/USD has extended its gains to 0.6860, where it is trading 0.6% higher on the day. The latest US consumer price inflation report, in which core measures came in a bit softer than expected, triggered some profit taking on long USD positions, hence the most recent bounce in NZD.
Short-term NZD/USD bulls will now be on the lookout for a retest of resistance at the 0.6900 area, which coincides with the 1st Apr low and the 21st and 200th DMAs. However, before that, the pair it will need to break above the 29th March lows at 0.6875, which it has not been able to do so far. That shouldn’t surprise traders too much.
NZD/USD is likely to trade dovish for the rest of the session on Tuesday ahead of the release of the RBNZ’s latest policy decision during the Asian session on Wednesday. Market participants are debating whether the bank will raise interest rates by 25 or 50 basis points and how aggressive the subsequent rate guidance will be.
Any moderate surprise (ie a 25bp move) would threaten the RBNZ’s status as the most aggressive central bank in the G10 and weigh heavily on NZD/USD. A drop back to the 0.6800 area and the 50 DMA, and potentially below it, would be on the cards. However, for now, the pair seems very likely to remain within a range of 0.6800-0.6900.
Technical levels
Source: Fx Street
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