NZD/USD Breaks Monthly Opening Range Ahead Of NZ Trade Balance Report

NZD/USD looks poised for a larger recovery as it breaks out of a narrow range and climbs to a fresh monthly high of 0.6997, but the broader outlook remains tilted to the downside as the Reserve Bank of New Zealand (RBNZ) remains in no rush to lift the cash rate from the record-low of 1.75%.

With New Zealand’s Trade Balance anticipated to show a narrowing surplus in April, signs of slower growth may encourage RBNZ Governor Graeme Wheeler to preserve the accommodative policy stance ahead of his departure in September, and the central bank may endorse a wait-and-see approach throughout 2017 as officials reiterate ‘numerous uncertainties remain and policy may need to adjust accordingly.’ In turn, a marked downturn in the term of trade may undermine the rebound in the exchange rate, and the diverging paths for monetary policy continues to cast a long-term bearish outlook for NZD/USD especially as the Federal Open Market Committee (FOMC) is widely anticipated to deliver a 25b rate-hike in June.

NZD/USD Daily

 

Chart – Created Using Trading View

• The string of failed attempts to break/close below the near-term support zone around 0.6820 (23.6% retracement) to 0.6840 (38.2% retracement) may fuel a larger correction especially as NZD/USD breaks out of the monthly range, with a close above the Fibonacci overlap around 0.6950 (38.2% retracement) to 0.6980 (23.6% expansion) opening up the next region of interest around 0.7040 (50% retracement).
• Will favor the topside targets as long as the Relative Strength Index (RSI) preserves the upward trend from March, but the broader outlook for the kiwi-dollar exchange rate remains tilted to the downside as price & the momentum indicator retain the bearish formations carried over from 2016.