NZD/USD on a Roller-Coaster Following RBNZ Financial Stability Report

The kiwi experienced a roller coaster yesterday against the buck after the Reserve Bank of New Zealand published its Financial Stability Report. The key points of the report were that the country’ financial system remains sound, however, it continues to face three risks: housing market vulnerabilities, bank funding pressures and dairy sector indebtedness. Even though they mentioned that the risks have reduced in the past six months, they underlined that they remain elevated. The report also stated the effective operation of the banking system and announced the tightening of the credit conditions in response to slowing deposit growth and elevated credit risks in the property development and dairy sectors.

The general tone of the report was upbeat, though the market was possibly in anticipation of such an outcome and reacted restrained after the first sharp rise.

NZD/USD Printed an Almost 3-Month High

The New Zealand dollar traded higher against the U.S. dollar since yesterday’s trading period as it rose more than 0.5%. Early this morning, the NZD/USD pair posted an almost three-month high at 0.7118 and the next immediate resistance level to watch is the 0.7170. Looking on the 4-hour chart, the technical indicators are signalling for bearish movement despite that the 100-SMA had a bullish crossover with the 200-SMA. The RSI indicator slipped below the 70 level while the MACD oscillator is falling into the positive path.
On the daily time frame, the technical indicators are indicating for a bullish move. The RSI indicator is approaching the 70 level and the MACD oscillator is moving higher with strong momentum. Our suggestion is to hold until the two different timeframes agree with the price’s direction.


Analysis by JFD Research