The NZD/USD currency pair has surged to its highest level since January 15, 2024, continuing its ascent within an ascending channel. This rally is primarily fueled by the weakening US dollar, mirroring the trends observed with other currencies like the AUD and CAD. Investor sentiment is boosted by the anticipation that the US Federal Reserve will ease monetary policy during its September meeting, potentially cutting interest rates by 25 or 50 basis points. This decision is considered imminent given the current inflationary environment in the US and the need to support the employment market.
In contrast, the Reserve Bank of New Zealand (RBNZ) has already taken proactive steps by reducing interest rates earlier this month. The RBNZ has also signaled potential further cuts in lending costs by up to 75 basis points by year-end, indicating a fairly aggressive stance on rates. This transparent approach to monetary policy is helping to shape market expectations and bolster the NZD.
Technical Analysis
On the H4 chart, NZD/USD has completed an upward wave to 0.6250 and is now entering an initial decline phase towards 0.6128. After reaching this target, a corrective movement to 0.6191 might occur, testing it from below before initiating a further decline to 0.6065 and potentially extending to 0.6000. The MACD indicator, positioned above zero but trending downwards, supports this bearish outlook.
On the H1 chart, the pair is currently developing a decline structure towards 0.6222. Following this, a brief uptick to 0.6238 is expected, potentially leading to a consolidation around this level. A downward exit from this consolidation could signal the continuation of the downward trend towards 0.6128. This scenario is corroborated by the Stochastic oscillator, with its signal line below 50 and aiming towards 20, indicating a likely continuation of the downward movement.
While the NZD/USD pair has seen a significant rise, technical indicators suggest a potential reversal in the near future. The MACD and Stochastic oscillator are displaying bearish signals, hinting at a possible correction in the market. Traders and investors should closely monitor these indicators and adjust their strategies accordingly.
