New Zealand dollar hotspots
NZD / USD attempts to restore last week’s decline before the New Zealand Reserve Bank’s (RBNZ) interest rate decision on 26 May, but all the more so from the governor Adrian Orr and Co can drag New Zealand Dollar as the central bank does not seem in a hurry to change gears.
The rebound in the NZD / USD rate occurs before the RBNZ rate decision
NZD /USD maintains the 50-day SMA (0.7138) as it continues to deny head-to-shoulder formation from the beginning of this year, but the exchange rate may face conditional conditions before the RBNZ meeting as the central bank is expected to remain at an officially low OCR, 0, 25%.
RBNZ seems to be maintainingregrets the least“ framework as the central bank warns thatsupply chain disruptions could potentially limit domestic activity in the near future, ”And the governor Arian Orr and Co. may keep the door open to further support the economy as officials remainready to lower the OCR if necessary.“
Dovishi’s monetary policy guidelines could provoke a downward reaction in the New Zealand dollar, as the RBNZ promisesremove financial incentives before it is confident that it will sustainably achieve consumer price inflation and employment targets;, But the bias in retail effects seems ready to persist if population consumption in 2020 is repopulated.
The IG customer mood report shows 47.55% of traders are now network long NZD / USD, short and long trader relationships stands 1.10 to 1 p.m.
The number of net long traders is 6.87% higher than yesterday and 19.16% higher than last week, while the number of net short traders is 7.19% lower than yesterday and 10.68% lower than last week. The rise in the net-long position has helped ease the retail bias, with 45.06% of traders having a net long NZD / USD last week, while the decline in net-short interest rates is due to the exchange rate trying to reverse the decline last week.
That being said the decline from the highest level of the year (0.7465) may prove to be a reversal of a broader trend rather than a major reversal as crowded behavior recovers from 2020 onwards; and the exchange rate may continue to deny the formation of head and shoulders from the beginning of this year as it persists beyond the 50-day SMA (0.7138).
NZD / USD interest rate chart
Source: Trading View
- A head and shoulder formation In 2021, when NZD / USD fell below the 50-day SMA for the first time since November (0.7138), but the year-on-year decline (0.7465) may prove to be a correction of the broader trend rather than a major reversal when the exchange rate goes back above the neck.
- The Relative Strength Index (RSI) brings out similar dynamics as this upside downd territory in order to break the downward trend at the beginning of this year, with NZD / USD rebounding to a 50-day SMA (0.7138) in April after a low of 0.6943 in March.
- NZD / USD has remained above the 50-day SMA (0.7138) after a lower monthly level ()0.7115), but need 0.7260 (expansion 7.86%) close to the region open Fibonacci overlaps from about 0.7320 (23.6% expansion) to 0.7350 (23.6% expansion).
- Another area of interest is around 0.7450 (38.3% expansion) to 0.7500 (100% expansion), which is in line with the highest level in February (0.7465), followed by 0.7570 (50% expansion).
– Written by currency strategist David Song
Follow me on Twitter at @DavidJSong