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NZD/USD moves away from four-month high, dips below 0.5900 amid modest USD bounce

  • NZD/USD retreats from a four-month high, touched in reaction to hot NZ inflation this Friday.
  • A modest USD uptick also weighs on spot prices, though the downside potential seems limited.
  • The divergent RBNZ-Fed policy expectations might continue to lend support to the currency pair.

The NZD/USD pair extends its steady intraday descent from the 0.5930 area, or a four-month high touched earlier this Friday, and slides to a fresh daily low during the first half of the European session. Spot prices currently trade just below the 0.5900 mark, down around 0.15% for the day, though any meaningful depreciation seems elusive amid a supportive fundamental backdrop.

Statistics New Zealand reported that the annual consumer inflation accelerated in the fourth quarter to 3.1%, above the central bank's target range. The hot inflation data reaffirmed expectations that the Reserve Bank of New Zealand (RBNZ) could raise interest rates later this year. Apart from this, a generally positive tone around the equity markets should act as a tailwind for the risk-sensitive Kiwi and limit the downside for the NZD/USD pair.

However, a modest US Dollar (USD) uptick prompts some profit-taking amid overbought conditions and following this week's sharp rise of nearly 200-pips. However, bets that the US Federal Reserve (Fed) will lower borrowing costs two more times this year might cap the attempted USD recovery from the vicinity of a two-week low. Moreover, the divergent RBNZ-Fed outlooks should contribute to limiting deeper losses for the NZD/USD pair.

Even from a technical perspective, the overnight breakout through the very important 200-day Simple Moving Average (SMA) favors bullish traders. Hence, it will be prudent to wait for strong follow-through selling before confirming that spot prices have topped out in the near-term and positioning for a corrective slide. Traders now look forward to the release of the flash US PMIs, which would drive the USD and provide some impetus to the NZD/USD pair.

New Zealand Dollar Price This week

The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies this week. New Zealand Dollar was the strongest against the Japanese Yen.

USDEURGBPJPYCADAUDNZDCHF
USD-1.27%-1.00%0.36%-0.85%-2.42%-2.65%-1.31%
EUR1.27%0.27%1.62%0.42%-1.18%-1.40%-0.04%
GBP1.00%-0.27%1.11%0.15%-1.45%-1.67%-0.31%
JPY-0.36%-1.62%-1.11%-1.18%-2.74%-2.96%-1.63%
CAD0.85%-0.42%-0.15%1.18%-1.56%-1.80%-0.46%
AUD2.42%1.18%1.45%2.74%1.56%-0.22%1.15%
NZD2.65%1.40%1.67%2.96%1.80%0.22%1.38%
CHF1.31%0.04%0.31%1.63%0.46%-1.15%-1.38%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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