NZD/USD bulls holding the reins, but bears are lurking

  • NZD/USD has been bid on the day as the US dollar pulls back.
  • A slightly risk-on tone has helped to support the commodity complex on Thursday.

NZD/USD has, for the most part, remained in the hands of the bulls following this week’s surprise hawkish outcome of the Reserve Bank of New Zealand.

At the time of writing, NZD/USD is trading at 0.7297, up 0.27% on the day as we head into the closing bell on Wall Street after travelling between a low of 0.7265 and a high of 0.7311.

However, the long weekend will mean that markets will be closed on Monday in the US so there will be a particular focus on tomorrow’s key US data which could lead to a last-minute bout of volatility in the greenback.

markets are bracing for Friday’s inflation data in Personal Consumption Expenditure for May.

”The index likely rose sharply (0.4%), but not as sharply as the core Consumer Price Index (0.9%); the difference reflects different source data and weights. The YoY change likely rose to 2.7% from 1.8%, although that is below the 2.9% consensus and the 3.0% for the core CPI ,” analysts at TD Securities explained.

Thereafter, there will not be much more to do than reflect, as analysts at ANZ Bank said.

”Even if other central banks around the world play catch-up on the RBNZ (delivering some convergence across FX markets), and venture to opine that hikes may be coming (or actually start tapering/tightening) New Zealand is probably still going to lead the way, and at a high level that does speak to ongoing NZD elevation.”

”So higher it is”, the analysts said, ”albeit gradually.”

NZD/USD technical analysis

And that brings us to the charts.

Indeed, there is no doubt that the technical outlook is bullish when considering the monthly chart’s price action and trend:

An upward extension would be expected following the correction of the prior bullish impulse.

We are in the throws of this fresh bullish impulse and according to the -272 Fibonacci of the correction, there are prospects of it extending to at least 0.7720.

Meanwhile, however, there will be opportunities to buy into the trend at a discount.

The daily chart, for instance, is showing signs of exhaustion and a correction could be imminent.

The W-formation is compelling which brings in the prospects of a 38.2% Fibonacci retracement that aligns with prior resistance as follows:

That being said, there are prospects of a deeper correction to test the 61.8% Fibo and confluence with the 21-day EMA and prior resistance.

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