NZD/USD: No post-Easter resurrection

Trades entered the market without any major epiphanies about which direction NZD/USD should head on Tuesday. Buyers early in the London session failed in their attempt to sustain prices above the prior 13 April swing low 0.67654. Sellers, quick to jump on the resulting failed head under shoulders patterns, reasserted their control over the kiwi. At the time of writing, the kiwi was heading toward its fifth consecutive day of losses.

More aggressive policy tightening from the Reserve Bank of New Zealand (RBNZ) on the 12 April has done little, if anything, to support the NZD/USD. Traders are clearly unconvinced the RBNZ will be able to raise interest rates by 50 bps on an ongoing basis as it had done in April. Aggressive Fed tightening, on the other hand, carries greater credibility now. Exactly how long that narrative will play out is up for question. The Fed is due to meet on May 4 and the RBNZD with a fresh set of projections on May 25.

Until then, on a technical basis there is certainly scope for further declines. The daily chart, which exhibits an ascending flag pattern that has broken to the downside and the descending right-angled broadening formation on the weekly time frame, open the possibility of even lower prices. Both 0.65884 and 0.65120 are both important levels for the pair to test. A break below the latter would mark the potential for more protracted losses. Meanwhile, near-term confidence is unlikely to be restored unless the pair can break above 0.68340.