As the NZD/USD currency pair shot up by 0.66% during the European trading session on Monday, it moved higher in the direction of the 0.5930 level. Beyond the headline numbers, the surge illustrates a significant shift in market sentiment toward riskier assets. In turn, the New Zealand dollar (NZD) appreciates against the United States dollar (USD). The NZD/USD broke above the 200-day EMA, now at 0.5912. This latest breakthrough points to a possibility that it will receive even more upward momentum.
It was clearly seen around the positive sentiment around the NZD/USD pair as investors respond to recent economic data. Unfortunately, soft United States non-farm payroll (NFP) data for August has ignited considerable dovish Federal Reserve speculation. This has created a tidal shift of market forces. This article will examine the implications of these developments and their potential impact on NZD/USD currency pair.
Market Dynamics and Technical Analysis
As you can see in NZD/USD pair’s trading session on Monday, this was an absolutely powerful move. It furthered its bullish streak by breaking above the important 200-day EMA resistance mark. This widely watched technical indicator by day-traders is offering more bullish confirmation as it sits just below the bull signal at an approximate 0.5912. The price action above this level confirms a bullish breakout and indicates that buyers are starting to take control of the overall market sentiment.
This past week’s climb to around 0.5930 has traders looking at the 14-day Relative Strength Index (RSI). Yet this indicator is currently headed towards the death knell 60.00. A move above this level on a sustained basis could make way for more bullish momentum for the NZD/USD pair. This increase would bring in many more retail traders who rely on technical analysis to guide their purchasing decisions.
Analysts caution that a downside move below the August 2 low of 0.5800 could expose the pair to further declines. If this occurs, the next key support areas would be the April 11 bottom at 0.5730. Keep an eye on the psychological support at the round figure of 0.5700 too. As a result, market participants continue to keep a close eye on important price levels that may determine the next direction of NZD/USD.
Correlation with Other Currency Pairs
The NZD/USD currency pair isn’t a self-contained world. Perhaps most importantly, is its correlation with other currency pairs, which we detailed in a recent currency heat map analysis. As of writing, the NZD is at 0.72% appreciation against the USD. It is at an index of 0.08% against the Australian dollar (AUD), 0.47% against the British pound (GBP), and 0.52% against the Japanese yen (JPY). These correlations have given our conservative traders an extra layer of insight into what’s causing the market to move and trader sentiment.
The relationships among all major currency pairs can have a large impact on firm trading tactics and competitive behavior in the marketplace. A stronger NZD against all these currencies then shows a deepening risk-on sentiment in global financial markets. This optimism has underpinned the sizable advances of the NZD/USD pair lately.
Implications of US Economic Data
The recent soft NFP data from the United States has played a crucial role in shaping market expectations surrounding monetary policy decisions by the Federal Reserve. Disappointing employment figures have fueled that speculation. Analysts are in broad agreement that the Fed will take a more dovish turn, and that’s likely to weigh on the USD.
Market participants will scrutinize this information. As they do, they are sure to become more hawkish and favor riskier assets like the NZD. The dynamic interaction between economic data and currency movements is very important. This underscores the importance of being aware of global economic indicators when trading currency pairs such as NZD/USD.