The NZD/USD currency pair is currently engaged in a recovery phase, rebounding from its recent correction near the 0.6070 level during the London trading session. The performance of the Kiwi asset is expected to be marked by volatility, as no significant triggers are present to guide its direction.
Despite mixed opinions regarding the Federal Reserve’s interest rate policy for the upcoming June meeting, the US Dollar Index (DXY) has demonstrated a robust recovery, approaching the 104.20 mark. Economic analysts are grappling with the tension between weak economic activities and substantial employment growth in the labor market.
In an effort to bolster economic prospects, the world’s second-largest economy has urged its major banks to reduce deposit rates, thereby injecting higher liquidity into the system.
This measure is expected to facilitate the utilization of full production capacity by firms. It is worth noting that China, New Zealand’s leading trading partner, is experiencing increased industrial and service activities, which is likely to support the value of the New Zealand Dollar.
Analyzing the hourly chart, the NZD/USD pair is exhibiting the formation of an Inverted Head and Shoulder pattern, indicating a prolonged consolidation phase. A breakout from this pattern would signal a bullish reversal. The neckline of this chart pattern is traced back to the high of 0.6110 on May 25.
The Kiwi bulls currently find support from the 20-period Exponential Moving Average (EMA) at 0.6076, acting as a cushion for the currency.
Additionally, the Relative Strength Index (RSI) (14) is striving to shift into the bullish range of 60.00-80.00. If this transition occurs, it will trigger an upward momentum for the NZD/USD pair.
A confident breach above the high of 0.6110 observed on May 25 will propel the Kiwi asset towards the low of 0.6160 recorded on May 01, followed by the psychologically significant resistance level at 0.6200.
Conversely, if the pair experiences a downward move below the intraday low of 0.6015, it will expose the asset to a fresh six-month low approaching the low of 0.5984 witnessed on November 11, 2022. A further decline below this level would bring the asset closer to the high of 0.5941 noted on November 02, 2022.
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