The New Zealand dollar (NZD) has seen a significant rally, up about 10% from its lows in April. This increase comes on the heels of the Reserve Bank of New Zealand’s (RBNZ) sixth rate cut since August of last year. Total cut thus far is 125 basis points. Recent decisions on monetary policy have taken center stage. Inflation in New Zealand has hit 5.9% y-o-y, prompting businesses and households to increasingly increase their expectations of inflation down the road.
And this seems to be having an effect, as the RBNZ’s aggressive easing strategy core inflation registered its first drop. Yet analysts are certain that this new trend will usher in a reappearance of inflation. Similarly, they do not anticipate it exceeding their new target range of 1-3% in the medium term. To be sure, this positive sentiment is one reason for the NZD’s recent strength on foreign exchange markets.
The Kiwi dollar vs US dollar (NZD/USD) exchange rate rocketed up 0.9% from the lows ahead of the rate decision. It currently sits at 0.5970. This is an important level as it currently puts the NZD/USD at or near multi-month highs (not seen since late April). The currency pair has developed a recent trend of increasingly shallow local lows over the past weeks. This trend suggests the possibility of even more upward progress.
Let’s take a look at what market analysts think about the NZD/USD being primed for a new trade opportunity. They look forward new moves to above the 0.6030 resistance level. As the price goes on and manages to breach 0.6000, it will be an ideal entry for strong traders. They can then cash in on this overall bullish move. The barrier at 0.6360 remains a formidable hurdle that has already been shown to be impregnable since early-2023.
The New Zealand dollar and the Australian dollar are both trading close to year-end levels. The euro and pound, meanwhile, have recently powered to three-year highs against the US dollar. This new dynamic in the foreign-exchange arena may have an outsized impact on investor behavior.
So, as positive as things may seem for the NZD, the best thing that retail investors can do is to trade carefully. Statistics indicate that approximately 77.37% of retail investor accounts lose money when engaging in contracts for difference (CFDs) and spread betting.