If risk appetite strengthens, NZD/USD could bounce

NZD/USD,H4

The NZ government is continuing with plans to ease lockdown restrictions as the number of Covid-19 continues to fall. The New Zealand Dollar has rebounded sharply and has more room to move higher, if risk appetite improves. NZDUSD is up 0.86% on the month and is trading above the 0.7100 level as of the time of writing. If economic conditions improve and the RBNZ can move forward with a rate hike, the New Zealand Dollar should respond with further strength.

The ANZ Business Outlook for September was released early due to Covid, and the reading showed an improvement from the August release. Business Confidence rose to -6.8, up from -14.2 previously. The survey also found that inflationary pressures have eased, but cost pressures remain high. Meanwhile, on Wednesday (15/09), Q2 GDP data will be released. With the combined effects of the pandemic and the implementation of the intensive lockdown, the economy is likely to suffer and struggle to repeat the strong 1.6% gain in Q1. However, the consensus is around 1.3%, which still shows signs that the recovery is continuing at a good pace.

The pair continued consolidating for the 7th day after being stuck at 0.7169, which was the previous neckline range, and also formed a lower high of 0.7155 at the end of last week. Yesterday (13/09) the price barely moved and only traded in a tight space of around 25 pips validated by the RSI spreading between the 50 levels. Last week’s top price cap, in the absence of a strong break to the upside, would be the 3rd peak lower and send the price to retrace the support levels from the 0.6804 advance.

Immediate minor support is at 0.7075. A break of this level will target the 0.7000 round number (around the 50% FR area of the 0.6804-0.7169 low). As long as the 0.7075 minor support holds, the bias will return to the upside for 0.7155 and 0.7169. A break of these two resistance levels would confirm the decline from 0.7463 while strengthening would accelerate the bull’s dominance to the north to 0.7315.

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