The NZD/USD currency pair saw a notable rise, climbing past 0.5660 during Monday’s European trading hours. This surge came on the heels of China’s announcement of measures aimed at ramping up private consumption. The Chinese government, through its central administrative body, indicated plans to provide financial support to those facing tough economic times, including offering additional assistance to some unemployed individuals, as reported by the Xinhua News Agency.
Looking ahead, market participants are closely watching the release of China’s official business activity indicators for December, expected on Tuesday. Anticipated data from the National Bureau of Statistics suggest steady growth in the Manufacturing Purchasing Managers’ Index (PMI) to 50.3, with the non-manufacturing sector also showing slight acceleration to 50.2.
Given New Zealand’s strong trading relationship with China, economic trends there significantly influence the New Zealand Dollar (NZD). Despite this positive linkage, the Kiwi faces some headwinds. Market sentiment suggests that the Reserve Bank of New Zealand (RBNZ) might cut the Official Cash Rate by 50 basis points, bringing it down to 3.75% in its upcoming February policy meeting.
On a broader scale, the US Dollar (USD) is experiencing a dip amidst quiet trading as traders gear up for the New Year festivities. The US Dollar Index (DXY), which monitors the value of the Greenback against six major currencies, has fallen to around 107.85.
Currently, the NZD/USD seems to have found a short-term support at the two-year low of 0.5520 on a weekly chart. However, the outlook remains bearish, with the 20-week Exponential Moving Average (EMA) hovering near 0.5900, exerting downward pressure.
Additionally, the 14-week Relative Strength Index (RSI) has dropped to around 30.00, indicating strong bearish momentum. If the Kiwi breaks below the critical psychological level of 0.5500, it may approach the 13-year low of 0.5470, with further support around the 0.5400 mark.
Conversely, a firm move above the November 29 high of 0.5930 might propel the pair toward the November 15 high of 0.5970, with potential resistance at the 0.6000 level.
NZD/USD Weekly Chart
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), affectionately known as the Kiwi, is a popular currency among investors. Its valuation is heavily tied to New Zealand’s economic health and the monetary policies set by its central bank. Unique factors also influence the NZD’s movement. Since China is New Zealand’s largest trading partner, any fluctuations in China’s economy can significantly affect the Kiwi. For instance, negative economic news from China may reduce New Zealand’s exports, impacting its economy and, subsequently, its currency. Dairy prices play another crucial role, as the dairy sector is one of New Zealand’s primary export earners. High dairy prices can lift export revenues, positively affecting the economy and boosting the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to maintain inflation between 1% and 3%, targeting a middle point around 2%. To achieve this, setting appropriate interest rates is key. If inflation rises too high, the RBNZ might hike rates to cool down economic activity, which could enhance bond yields and attract more investors, strengthening the NZD. Conversely, lower rates generally lead to a weaker NZD. The interest rate differential between New Zealand and the US Federal Reserve also plays a pivotal role in influencing the NZD/USD pairing.
Macroeconomic data releases in New Zealand are vital for gauging economic health and can affect the NZD’s value. A robust economy, characterized by high growth, low unemployment, and strong confidence, bolsters the NZD. Such strength attracts foreign investments and might prompt the RBNZ to raise interest rates, especially if growth coincides with increased inflation. In contrast, weak economic indicators typically lead to NZD depreciation.
The New Zealand Dollar often gains strength in periods of market optimism, described as "risk-on" periods, when investors have a positive growth outlook and perceive lower risks. Such scenarios typically favor commodity currencies like the Kiwi. However, during times of market volatility or economic uncertainty, the NZD tends to weaken as investors seek out safer assets.
