Market Analysis: NZD/USD Hovers Close to Two-Year High

NZD/USD Hovers Close to Two-Year High

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Key Takeaways

• The New Zealand dollar fares well in the Asian trading session
• The US dollar is weaker across the board

The New Zealand dollar has been trading in a strong uptrend channel since March. The NZDUSD pair has so far moved over 27% north since the pandemic fears hit the market and the exchange rate reached a low of 0.5465 on Mar 18.

The current market price of NZDUSD is 0.6947 with an intraday high of 0.6963. The New Zealand dollar was quick to embark on its journey to new highs at the start of the Asian trading session on Monday. The opening price of 0.6926 was quickly absorbed on the positive data coming out of the country. New Zealand’s retail sales jumped 28% in the third quarter, 8% higher than expectations. Compared to the -14.6% registered for the second quarter, even with restrictions, the country managed to pull ahead and demonstrate a strong bounce.

The Kiwi was successful in taking the bids to hit its highest level against the US dollar for the last 2 years. On Dec 4 the NZDUSD pair was at a high of 0.6969 followed by a medium-term consolidation for the next 4 months. The pair were making lower lows until the market meltdown in March 2020. Since then, we have seen a strong and quick recovery in a relatively short time.

The New Zealand dollar was also lifted against other counterparts. The NZDCAD posted a gain of about 40 pips in the early trading, going from 0.9058 to 0.9099, a level last reached in April 2019. Similarly, the NZDCAD pair has been on the rise. NZDJPY and NZDCHF also moved to the upside on the data release, posting gains of about 30-35 pips each.

Concerns About Adequate Support to the American Economy

The NZD/USD pairing maintains its uptrend momentum in today’s early hours of the European session as the US dollar is weaker across the board. NZD/USD remains well above the 200SMA, the 100SMA, and the 50SMA. Additionally, price action continues to favor the bulls even after the RSI signals overbought levels and the MACD similarly points to overbought conditions.

Kiwi bulls seem to continue to stretch their run favored by circumstances such as positive data and a weaker US dollar. However, traders and investors should be wary that price behavior may prove to be tough to predict as the pair is highly volatile and liquid.

On the other end of the pair, the US dollar is currently depressed amid fears that the US Federal Reserve will not meet the Covid-19 crisis adequately and provide the necessary support to the economy. Last week Secretary of Treasury Steven Mnuchin urged the Fed to release $500 billion into the economy. The request was met with disapproval by the Fed, which left the markets to wonder if the central bank will have enough liquidity to counteract the negative effect of the pandemic on the economy. The pandemic situation in the US and Europe remains intense. Although the US is off its daily record highs, the hospitalization rate is sustained, which puts a considerable strain on the healthcare system. On a positive note, the antibody treatment by Regeneron was approved by the Food and Drug Administration (FDA) for emergency use in the US, while Pfizer’s vaccine candidate may soon be released in the UK.

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