The NZD/USD currency pair is under pressure as the exchange rate teeters near the 0.5940 level. During Tuesday’s European trading session, it was down almost 0.4%. The New Zealand dollar, the kiwi, aka the NZD, is the big underperformer. This fundamental underperformance is resulting in the most bearish sentiment that has ever been seen for this currency pair. The duo is consistently trading above the key 200-day Exponential Moving Average (EMA), currently at about 0.5910. Analysts continue to watch it like hawks for any sign that it’s continuing to decline further.
As captured in the chart below, over the last month the performance of the NZD has been particularly weak, with the currency undergoing three separate selloffs. In these most recent evaluations, we’ve seen NZD drop -0.38%, -0.39%, -0.20%, -0.17%, -0.35%, -0.17%, and -0.49%. These numbers point to a continuing trend of disappointment for the antipodean currencies, darkening outlooks in the process.
Technical Analysis of NZD/USD
The NZD/USD pair aesthetically reveals downtrend playbook. This is further illustrated by the bearish cross below of the 20- and 50-day exponential moving averages (EMAs). This technical set up implies that the pair may be met with additional bearish pressure in the near-term. The 14-day Relative Strength Index (RSI) for NZD/USD is currently sitting around 40.00, an important line in the sand for market participants. If the RSI were to fall below this level, it would trigger a new round of bearish momentum for the pair.
Traders are mainly looking for important support levels that could set the tone for future direction of the NZD/USD. A further decline beyond June 23 low of 0.5883 will expose additional support at the May 12 low of 0.5846. Traders need to be alert to this possible sea change. Additional drops might push it in the direction of the sacred support barrier of 0.5800 that may spark robust buying and selling curiosity.
Economic Factors Influencing NZD Performance
The positive macro economic fundamentals across NZ is playing a part in the Kiwi’s woes across the board against its other valued peers. The quarterly reading for New Zealand shows prices compared to the previous quarter, indicating economic challenges that have affected investor sentiment and currency valuation. With global markets still reacting cautiously to the latest economic data releases, the NZD’s performance continues to be acutely sensitive to domestic and international factors.
The downward trajectory of the NZD underlines deeper worries about New Zealand’s economic vitality and future growth. Consumer spending continues to threaten many sectors by spending far more out for trade balances. Other analysts are cautioning that these and other factors will continue to strongly affect the currency, at least in the short term.
Market Reactions and Future Expectations
Market analysts are cautious of deepening glances of the NZD/USD pair. They are more sensitive to today’s technical signals. As the sustained underperformance of antipodean currencies indicates, market participants should always be on the lookout for downtrends. As a result, the market will be extremely responsive to price changes. Beyond inflation, next week’s economic data becomes a major factor in positioning trades.
Traders are closely testing and re-evaluating the positions they hold. On the lookout for any change in momentum or changes in trading volume that indicates a reversal or a continuation of the trend, they are hyper-focused on market indicators. Considering this bearish view, traders in the forex arena need to prepare for potential turbulence as the economic landscape continues to unfold.