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This is a follow up article to: Australian and New Zealand dollars face pressure from US growth concerns
The New Zealand dollar (Symbol: NZDUSD) maintained its upward momentum, trading at around $0.606, as it extended its rebound for the second consecutive session.
This rally has been largely supported by a weakening U.S. dollar, driven by market expectations that the Federal Reserve will begin cutting interest rates as early as next month.
Picture: NZDUSD extends rebound on Fed rate cut expectations, as observed on the VT Markets app.
Going back to the charts, we see it indicating a solid uptrend, with the price consistently trading above the key Exponential Moving Averages (EMAs). The upward slope of the EMAs, particularly the 72-period EMA, supports the continuation of this bullish momentum.
Additionally, the MACD indicator is showing positive momentum, with the MACD line above the signal line, suggesting that the bullish trend may persist in the near term.
Traders should keep an eye on the resistance level at 0.60861, which could be a key hurdle for the pair. If the price breaks above this level, it may signal further upside potential.
Traders are now closely watching key events such as the release of the Federal Open Market Committee (FOMC) Minutes and Fed Chair Jerome Powell’s upcoming speech at the Jackson Hole Economic Symposium.
These events are likely to provide further insights into the U.S. central bank’s monetary policy direction, which has significant implications for the NZD/USD pair.
Last week, the Reserve Bank of New Zealand (RBNZ) reduced its official cash rate to 5.25%, marking its first cut since March 2020. This move was accompanied by signals from RBNZ Governor Adrian Orr that more easing could be on the horizon.
Orr also expressed confidence that inflation is now back within the central bank’s 1-3% target range, reinforcing the case for a more accommodative monetary policy stance.
On the economic front, the business activity of New Zealand showed signs of improvement in July, with manufacturing activity rising to 44 from 41.1 in June, and services activity increasing to 44.6 from 40.7.
These figures, while still below the 50-mark that separates contraction from expansion, indicate a slight recovery from the previous month’s lows.
The upcoming FOMC Minutes and Powell’s speech at Jackson Hole could trigger significant volatility, especially if the tone turns hawkish instead of from the current dovish expectations.
Related content: What is hawkish vs dovish?
Otherwise, the anticipation of rate cuts in the U.S. will continue to drive the U.S. dollar lower, providing a supportive environment for the NZD. However, caution is advised as the market remains highly sensitive to any shifts in expectations.
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