NZD: Global economic disruption by the virus expected to last at least until 2021
|RBNZ Governor Adrian Orr said the global economic disruption caused by the coronavirus pandemic is expected to last and lead to lower economic growth, employment opportunities, and inflation at least until 2021.
The RBNZ and financial institution system are well-positioned to deal with economic storms and support the inevitable pace of recovery, Governor Orr believes, because that the banking system was required to hold more capital, liquidity, and lower risk mortgage loans during the ‘good times’ of recent years. Banks will play an important role and become part of economic recovery, said Orr.
NZDUSD traded with a narrow range towards the end of the month, since a few days ago. The range of transaction ranges is only about +/- 50 pips. Prices tend to consolidate and contract in a triangle. The price level of 0.6380 is the key support for the pair’s decline, while the upward movement will try to test the closest high price at 0.6583 with advanced testing of the peak price of December 2019 at 0.6754. If 0.6380 fails to provide support to the pair, then the next Support level could be seen at 0.6250 (50.0%) and 0.6175 (61.8%) from the upleg in May.
Meanwhile, if 0.6754 is successfully overcome in a continued rally, this will imply the longterm downtrend has been completed. The indicator is still positive, as momentum starting to fade.
NZDCAD has been maintaining gains over a narrow range, with the bias tending to be neutral in the nearterm. There are no clear signs of reversal yet. Technical indicators still support the strengthening of the NZD against CAD. It cannot be denied that the momentum has declined, with tough consolidation,but do not rule out the possibility of a continued rally, after breaking out 0.8735 and testing temporarily at 0.8798. On the upside it will test the average monthly high level at the crucial level of 0.8900, which would maintain the bearish trend. If this level is broken however, the implications of the big trend will turn to bullish.
On the downside, Support at 0.8683 will act as a longterm barrier. If it breaks then the correction to the 4-month rally (from 0.8012 to 0.8800 area) could be seen with a pullback and a retest of Support levels at 0.8600; 0.8525 or even 0.8350.
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