The New Zealand dollar has been steadily gaining ground against the US dollar, reaching 0.6014 as of Monday. This increase comes ahead of the upcoming Reserve Bank of New Zealand (RBNZ) meeting, where it is widely expected that the official cash rate will remain at 5.5%. This decision reflects concerns about New Zealand’s economy, despite recent data releases showing a mixed economic outlook.
Recent data has shown a less-than-expected increase in the unemployment rate for New Zealand in Q2, while inflation expectations have dipped to a three-year low for Q3. These factors strengthen the case for potential rate cuts by the RBNZ. However, it is unlikely that rates will be adjusted downwards in August, as the central bank may prefer to wait for cues from major global central banks.
Investors are also turning their attention to upcoming US inflation data, which could further impact global monetary policy expectations, particularly in relation to the Federal Reserve. Despite challenges faced in July and August, the New Zealand dollar has shown resilience, indicating the potential for continued stability, unless significant external shocks occur.
Technical Analysis of NZD/USD Pair
Looking at the technical analysis of the NZD/USD pair, it is currently developing a consolidation range just above the 0.5983 level. There is an expectation for the range to extend to 0.6050, which is considered a corrective move. Following this correction, the market is likely to initiate a downward trend towards 0.5920. A breach of this level could lead to a further decline towards 0.5800.
The MACD indicator supports this bearish outlook, as it is currently above zero but pointing downwards, signaling potential selling pressure. On the hourly chart, the NZD/USD pair is in the fifth segment of a growth wave aiming for 0.6050, which is seen as a corrective rally. However, upon reaching this level, a reversal is expected, leading to a decrease towards 0.5983 and potentially extending the downtrend to 0.5920. This bearish scenario is further backed by the Stochastic oscillator, whose signal line is positioned above 80 but shows signs of an upcoming downturn.
While the New Zealand dollar has shown resilience in the face of economic challenges, there are indications pointing towards a potential decline in the near future. It is crucial for investors to closely monitor global monetary policy expectations and key economic indicators to make informed decisions regarding the New Zealand dollar.
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