New Zealand Dollar sinks toward its July low after the Fed hikes
- NZD/USD has fallen every session for more than a week and is just above 0.5700.
- New Zealand Q2 GDP due Wednesday at 22:45 GMT, forecast at 0.1% against 0.8%.
- Daily momentum gauge at 8, the lowest reading since July.
NZD/USD has dropped in six straight sessions. The run started near 0.5900 on September 8, went through both long-run averages near 0.5850 early in the run, and the last three sessions have been the biggest of the lot. The pair is trading just above 0.5700 after Wednesday's Fed hike to 3.75-4.00%, and the July low near 0.5625 is the next level of any note below. The daily momentum gauge is at 8, which is as low as it has been since July.
A central bank that raised twice and a currency that fell anyway
The Reserve Bank of New Zealand (RBNZ) raised its cash rate to 2.75% on September 2, its second increase since July, because inflation hit 4.1% in the second quarter on fuel prices. It also said the next move is probably a pause in October and another rise in December. That's a central bank going the same direction as the Fed, just from a lower starting point, and the gap between 2.75% and the Fed's new 3.875% midpoint is more than a point. The Fed's own forecasts don't help either: they raised the US growth outlook for this year and next and took every cut out of 2027. The Kiwi is a currency that rises when investors want risk, and on a day the Fed said US growth is strong and rates are staying high, they didn't.
The number that explains the selling comes out after the selling
New Zealand's second-quarter GDP is due on Wednesday at 22:45 GMT, and the forecast is 0.1% growth on the quarter after 0.8% in the first quarter, which would be a stall. It's also the kind of number that determines whether the RBNZ's December hike stays on the table, so a miss pushes it further out and a beat brings it back in. Trade figures follow on Thursday at 22:45 GMT. The pair has fallen for six sessions into a number that could justify the whole move, which is the market pricing a slowdown before the statisticians confirm it. With momentum this stretched, the reaction to a beat would be sharper than the reaction to a miss.
Levels and bias
Resistance: 0.5750, then just under 0.5800, then the 50-day Exponential Moving Average (EMA) near 0.5850, which the pair went through early in the run and has not been back to.
Support: 0.5700, which Wednesday's low came within a few pips of, then the July low just above 0.5600.
Bias: Bearish below 0.5750. The first objective is 0.5700 and the second is the July low just above 0.5600. The daily Stochastic Relative Strength Index (Stoch RSI), a momentum gauge, reads 8, deep in oversold territory, so a bounce toward 0.5750 is likely at some point and wouldn't change the picture. The bearish case fails on a daily close above 0.5800.
NZD/USD daily chart
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
Artigos Recomendados
