The New Zealand Dollar (NZD) is experiencing a surge in value, with the NZD/USD pair approaching the 0.5900 resistance area. This upward trend is primarily attributed to the weakening US Dollar (USD) and dwindling expectations of immediate Federal Reserve interest rate hikes. The NZD/USD has already reached session highs, surpassing 0.5880, and is now eyeing two-month highs above 0.5900. This movement is further supported by the cooling US CPI and PPI inflation in July, which has reduced the likelihood of a Fed rate hike in September, according to Brown Brothers Harriman's Elias Haddad.
Haddad's analysis highlights the impact of this repricing on the USD, noting that it is "keeping USD in check and lifting risk appetite despite the ongoing US-Iran conflict." The technical analysis reveals key resistance at the 0.5920 area, with the pair holding above the 200-day SMA and bouncing up strongly. The upward trendline support from late-June lows is also significant.
Momentum indicators in the daily chart are neutral to bullish, with the Relative Strength Index (RSI) near 59 indicating a constructive bias. However, a slightly negative Moving Average Convergence Divergence (MACD) suggests caution regarding the frail upside pressure. Bulls are targeting the area between 0.5905 and 0.5920, where August 3 and 7 highs meet the 61.8% Fibonacci retracement of June's selloff. The next significant target is the 0.6000 area, where bulls were previously capped in May and early June.
On the downside, the initial support is the area between the upward trendline, now at 0.5850, and the 200-day SMA at 0.5831. Below this, the late July lows near 0.5760 would come into play. The USD's performance against other major currencies is also noteworthy, with the NZD showing the strongest percentage change.
In conclusion, the NZD/USD's approach to the 0.5900 resistance area is a significant development, influenced by the weakening USD and cooling inflation. The technical analysis provides insights into potential support and resistance levels, with bulls targeting the 0.6000 area. However, the ongoing US-Iran conflict and the mixed technical indicators suggest a cautious approach. The performance of the USD against other currencies further emphasizes the global impact of these economic factors.
