On Wednesday, the New Zealand Dollar (NZD) was the story of the day in currency markets. Across the pond, the NZD/USD currency pair hit a close to three-week high during the Asian trading session. It was, however, still under the important line in the sand of 0.5800. This fluctuation in currency values occurred amid a modest uptick in the U.S. Dollar (USD), as traders positioned themselves ahead of the Federal Reserve’s upcoming announcements.
An almost flat price reaction of -0.01% NZD/USD represents the current volatility reflected by the NZD’s behaviour in a competitive market. Before the above dip, it started even stronger on the trading day with a 0.15% increase. The currency rose first, then fell, then rose again over periods of weeks, then months. Changes were 0.16%, -0.05%, -0.01%, and -0.18% reinforcing its susceptibility to the fierceness of market forces.
Beyond its strength or weakness relative to the USD, the NZD strengthened against other major currencies. It was up 0.05% vs Japanese Yen (JPY) and up 0.04% vs Canadian Dollar (CAD). Indeed, the NZD spiked up 0.33% against the AUD at one stage. It then saw a subsequent increase of 0.14%. At the same time, it fell by -0.09% to CHF (Swiss Franc) today. In a third, it managed to at least hold ground and not lose value against the USD.
Traders are preparing for changing monetary policy, especially from the Federal Reserve. These changes would drastically reshape industry currency valuations globally, including large swings in the NZD. According to analysts, subtle signals from the Fed regarding future interest rate adjustments or changes to their economic outlook will likely determine USD performance. This, in turn, will impact on NZD/USD trading.
The NZD/USD pair’s movement below 0.5800 has drawn attention as it indicates both resistance and support levels vital for traders looking to navigate this currency pair’s volatility. The upcoming economic reports and messages from the Fed will be critical in helping decide the NZD’s next move. Depending on the timing and specifications, they could let the currency break free of its liberation enclave or merely let it bob around its established range.