NZD/USD Sellers Push for Downtrend Amid Strong USD Fundamentals

Date: Wednesday, June 19, 2024 

Wednesday Market Overview: 

The US Dollar Index, despite pulling back from its recent peak of 105.56, maintained a strong bias in Wednesday’s Asian trading session. The primary bullish outlook for the dollar remains intact, supported by a robust labor market and solid US fundamentals. Persistent consumer pressures have pushed the Federal Reserve towards maintaining higher interest rates. On the other hand, Paul Conway, Chief Economist at the Reserve Bank of New Zealand, remarked on Wednesday that significant progress is being made in returning inflation to target, with increasing spare capacity. Further softening in the labor market is likely to reduce inflationary pressures. Additionally, declining growth in China’s manufacturing indices has diminished the appeal of the New Zealand Dollar. These contrasting factors continue to favor the USD over the NZD. 

Technical Analysis: 

On the daily chart, the NZD/USD pair has entered a corrective downtrend after peaking around its long-term descending trendline resistance at 0.62215. Following buyers’ attempts to defend the 0.60972 support, sellers have persistently targeted this key level. A successful break below this support would complete a double top pattern, setting the stage for further declines towards the 100-day moving average at 0.60634. Continued bearish momentum could extend the decline towards subsequent targets at 0.60204 and 0.59729, with these levels aligning with key Fibonacci retracement levels and historical price points. The divergence between oscillators and price action, along with the current price behavior, suggests an increase in selling pressure. 

Alternative Scenario: 

If buyers manage to defend the 0.60972 support and break through the nearby resistance at 0.61447, the price could retest the descending trendline at 0.62215. Sustaining a bullish trend would require a break above this area. 

Market Overview and Key Levels 

Resistance Levels: 

• Resistance 2: 0.62215 
• Resistance 1: 0.61447 

Current Price (at the time of analysis): 0.61313 

Support Levels: 

• Support 1: 0.60972 
• Support 2: 0.60634 
• Support 3: 0.60204 
• Support 4: 0.59729 

Impactful Events: 

Investors are now awaiting New Zealand’s Q1 GDP data, set to be released on Thursday. This report is likely to show moderate growth. Weaker-than-expected data could further weaken the NZD, while stronger-than-expected growth could bolster the currency. 

Oscillators and Risk Warnings: 

• RSI (Relative Strength Index): Neutral, indicating no immediate overbought or oversold conditions. 
• MACD (Moving Average Convergence Divergence): Mixed, suggesting indecision in momentum. 
• Moving Averages: Mixed, reflecting current market uncertainty. 

Conclusion: 

The NZD/USD pair is under pressure as sellers aim to establish a downtrend, leveraging strong USD fundamentals and weaker NZD outlook. A break below the key support at 0.60972 could confirm further downside, with targets at 0.60634, 0.60204, and 0.59729. However, if buyers defend this support and overcome the 0.61447 resistance, a retest of the higher trendline resistance at 0.62215 is possible. 

Traders should closely monitor the upcoming New Zealand GDP data, as it will be a critical determinant of the pair’s near-term direction. Keeping an eye on these technical levels and broader economic indicators will be essential for navigating the current market dynamics effectively.