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NZD/USD: Bulls need to get over the 200-D SMA

  • NZD/USD has been consolidating a touch above the pivot around 0.6780 and below the 200-4 hr SMA that is tucked in just below the prior day's highs of 0.6813.
  • In early Asia, NZD/USD is currently trading at 0.6781, with the price capped by the 200-D SMA as bulls struggle to make further headway following a bullish start to the year. 

NZD/USD is ending the first full week of 2019 on a positive note, having climbed back from the flash crash lows and carried the bullish sentiment towards the 0.68 handle as markets position for a far slower pace of rate hikes from the Fed. However, as analysts at ANZ Bank explained, the bird is facing a tug of war:

"The kiwi is facing a tug of war, with a more dovish Fed, slowing Chinese growth, trade developments and event risk all buffeting the NZD. We retain a medium-term downward bias but don’t expect the path to be straightforward from here."

Similarly, while the market is pricing out Fed hikes, what should be noted is that the markets are greatly more dovish than what the Fed appears to be and somewhat more pessimistic than the Fed's growth projections for the US economy. It is more the global economy that the Fed is concerned for and the implications for the US economy down the line rather than the immediate future. There are plenty of risks offshore though, associated with world trade disputes as well as Brexit and poor economic growth outlooks on mainland Europe. Te wait and see approach from the Fed does not rule out rate hikes and it may not take much to tip the balance should something flare up overseas, supporting the safe haven and yield case for the dollar once again. 

NZD/USD levels

  • Support 0.6650.
  • Resistance 0.6860.

Bulls still struggle at the 0.68 handle still but should there be a surge higher, then the 50% Fibo is located at 0.6929. This is guarding the December high of 0.6969. On the flip side, a break of the 100-D SMA at 0.6681 with daily closes will sure up the negative bias again, especially on a break back below the 23.6% Fibo.

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