The New Zealand dollar has plunged to a five-month low and the pair has touched the 0.5890 level. This drop was triggered by the release of strong US retail sales data, which raised concerns that the Federal Reserve could delay interest rate cuts expected in 2024.
The prevailing expectation in the stock market is that the Federal Reserve will begin its monetary policy easing cycle in September, diverging from the previous June forecast. This adjustment in expectations has strengthened the position of the US dollar, putting additional pressure on other currencies.
The Reserve Bank of New Zealand (RBNZ) has held its interest rate steady for six consecutive meetings, including a neutral stance at its April meeting. The central bank's main objectives are to alleviate pressures on production capacity and mitigate the economic impact of inflation. Despite signs of weakening economic activity, New Zealand's annual inflation rate fell to 4.7% in the quarter ending in December, the lowest since the second quarter of 2021. However, inflation continues being significantly above the RBNZ's 1-3% target range.
There are signs that New Zealand's economy entered a technical recession in the third quarter of 2023, with more recent data still awaited.
NZD/USD technical analysis
The NZD/USD H4 chart shows that a consolidation range was established around the 0.5937 level, followed by a move lower to 0.5872. A corrective move back to 0.5900 is possible (testing from below), after which a further decline to 0.5830 is anticipated. This bearish scenario is supported by the MACD indicator, with its signal line situated below zero and pointing downwards.
On the H1 chart, the NZD/USD pair continues its downward trajectory towards 0.5854. After completing the decline to 0.5872, a corrective move to 0.5900 is likely. Subsequently, a new bearish phase could target 0.5854, potentially extending towards 0.5830. This outlook is confirmed by the stochastic oscillator, currently below 20, with an expected rise to 50, indicating the possibility of a temporary corrective rally before continuing the downward trend.
By RoboForex Analysis Department
Disclaimer
Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
