New Zealand Dollar Outlook
NZD/USD appears to be stuck in a narrow range as it holds above the weekly low (0.6271), but the exchange rate may struggle to retain the advance from the January low (0.6192) as it fails to trade back above the 50-Day SMA (0.6375).
NZD/USD fails to push back above 50-Day SMA
Unlike the price action in January, NZD/USD has not responded to the positive slope in the moving average, and the decline from the monthly high (0.6538) may lead to a potential shift in the near-term trend if the exchange rate fails to defend the opening range for 2023.
Looking ahead, it remains to be seen if the U. of Michigan Consumer Sentiment survey will influence NZD/USD as the update is anticipated to show a further improvement in household confidence, and a positive development may generate a bullish reaction in the US Dollar as it raises the Federal Reserve’s scope to pursue a more restrictive policy.
In turn, Fed officials may continue to endorse a hawkish forward guidance ahead of the next meeting in March, and it remains to be Chairman Jerome Powell and Co. will project a steeper path for US interest rates as the central bank is slated to update the Summary of Economic Projections (SEP).
CME FedWatch Tool
Source: CME
However, the update to the U. of Michigan survey may do little to sway the US monetary policy outlook as the CME FedWatch Tool shows a greater than 90% probability for another 25bp rate hike next month, and speculation for an imminent change in regime may continue to curb the appeal of the Greenback as the Federal Open Market Committee (FOMC) emphasizes that ‘shifting to a slower pace will better allow the Committee to assess the economy’s progress toward our goals.’
With that said, the US Dollar may continue to face headwinds as the Fed appears to be approaching the end of its hiking-cycle, but NZD/USD may struggle to retain the advance from the January low (0.6192) as it fails to trade back above the 50-Day SMA (0.6375).
New Zealand Dollar Price Chart – NZD/USD Daily
Chart Prepared by David Song, Strategist; NZD/USD on TradingView
- NZD/USD appears to have reversed course ahead of the June 2022 high (0.6576) as it no longer responds to the positive slope in the 50-Day SMA (0.6375), with a break/close below the 0.6220 (50% Fibonacci extension) to 0.6280 (38.2% Fibonacci retracement) area raising the scope for a run at the January low (0.6192), which largely lines up with the 200-Day SMA (0.6188).
- Failure to defend the yearly opening range may push NZD/USD towards 0.6170 (50% Fibonacci extension), with the next area of interest coming in around 0.6070 (61.8% Fibonacci extension).
- However, lack of momentum to break/close below the 0.6220 (50% Fibonacci extension) to 0.6280 (38.2% Fibonacci retracement) area may push NZD/USD back above the 50-Day SMA (0.6375), with a close above the 0.6380 (23.6% Fibonacci extension) to 0.6430 (23.6% Fibonacci extension) region opening up the 0.6510 (50% Fibonacci retracement) to 0.6570 (38.2% Fibonacci extension) zone, which incorporates the monthly high (0.6538).
— Written by David Song, Strategist
