NZD/USD. 300 points is not the limit: kiwi's march

The New Zealand dollar, paired with the US currency, is desperately trying to move up, sweeping away all price barriers on its way. In less than three weeks, the NZD/USD pair rose by almost 300 points, completely regaining those positions that were lost during the period of the greenback's appreciation. At the moment, the kiwi is trading in the area of three-month highs, on the threshold of the 71st figure. With a high degree of probability, it can be assumed that NZD/USD bulls will overcome the resistance level of 0.7100 (the upper limit of the Kumo cloud on the daily chart), having determined for themselves the next goal in the form of the 0.7130 mark (the upper line of the Bollinger Bands indicator on the same timeframe). Now it's up to the Nonfarm report: if it fails the US currency on Friday, the kiwi will continue its upward movement and will return to the price range of 0.7150-0.7300 in the medium term, within which it was traded in the spring of this year.

The recipe for the upward trend of NZD/USD is quite simple: the hawkish intentions of the Reserve Bank of New Zealand, the improvement of the epidemiological situation in New Zealand, the growth of key macroeconomic indicators and, in the end, the weakening of the greenback against the background of the indecision of the head of the Federal Reserve. Here, in fact, is the whole set of components that help the kiwi to conquer new and new price heights.

The RBNZ was supposed to become a kind of pioneer in the issue of tightening monetary policy. According to the general expectations of market participants, the central bank could raise the interest rate already at the August meeting. The coronavirus prevented the implementation of this scenario, which forced the prime minister to re-introduce a hard lockdown in the country. The situation unfolded rapidly, literally on the eve of the meeting of the New Zealand central bank, which later, as expected, decided not to rush to tighten the parameters of monetary policy.

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But the hawkish expectations have not gone away. At the July meeting, the RBNZ decided to curtail the incentive program, which was supposed to be in effect until the summer of next year. At the same time, the head of the New Zealand central bank, Andrian Orr, voiced hawkish intentions following the meeting, hinting at the readiness of the central bank to begin tightening monetary policy. At the August meeting, the central bank took a wait-and-see position, but at the same time also voiced hawkish remarks. In particular, in an accompanying statement, the New Zealand central bank indicated that it would tighten monetary policy at the last meeting this year if "the necessary conditions for this" remain in the country. And in September next year, the rate should be 1.4% (previously the forecast level was at around 0.50%). In addition, the members of the central bank were optimistic about the growth rate of inflation: the growth of the annual CPI, according to forecasts, should grow to 2.2% by September next year (previously the forecast was at 1.6%).

The US Federal Reserve, which is also standing in the way of normalizing monetary policy, cannot boast of such speed. Even in the face of the delta strain, the RBNZ remains resolute.

Meanwhile, the number of new COVID cases in New Zealand has been falling for several days in a row amid a hard lockdown. The total number of cases of the new outbreak is 612, of which 597 are in the largest city of the island state of Auckland. In view of this fact, about 1.8 million residents of this city will remain in strict isolation mode of the fourth level for another two weeks, while restrictions for the rest of the country have been slightly relaxed since yesterday. Schools, universities, offices and public places are still closed, but businesses have been allowed to provide contactless services. In general, according to a number of local experts, the epidemiological situation is gradually improving – the Covid outbreak was stopped thanks to prompt and fairly strict measures, the implementation of which is also strictly controlled by the authorities.

It should be noted here that two meetings of the RBNZ are scheduled until the end of this year – in early October and at the end of November. According to general market expectations, the central bank will decide to raise the interest rate to 0.5% at the last meeting this year. However, the corresponding hawkish expectations "in advance" support the kiwi, determining the strength of the upward trend of NZD/USD. Weak positions of the greenback only strengthen the positions of the bulls.

From the technical point of view, the pair is located on the D1 timeframe between the middle and upper lines of the Bollinger Bands indicator, as well as above the Tenkan-sen and Kijun-sen lines, but at the same time within the Kumo cloud, testing its upper limit (the 0.7100 mark). If the price overcomes this target, the Ichimoku indicator will form a bullish "Parade of Lines" signal, opening the way to the next resistance level of 0.7130 (the upper line of the Bollinger Bands on the same timeframe). However, this is not the limit: in the event of further weakening of the US dollar, the kiwi will be able to return to the range of 0.7150-0.7300 in the next 2-3 weeks, within which it was traded this spring.

The material has been provided by InstaForex Company - www.instaforex.com

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