The New Zealand dollar weakened against the greenback this week following the rise in risk aversion, and the high-yielding currency may continue to face selling pressures over the near-term as investors remain fearful of a protracted recession in the global economy.
[B]Currency Pair:[/B] NZD/USD
[B]Chart:[/B] 60 Min Charts
[B]Short-Term Bias:[/B] Flat
[B][U]Analysis[/U][/B]
The New Zealand dollar weakened against the greenback this week following the rise in risk aversion, and the high-yielding currency may continue to face selling pressures over the near-term as investors remain fearful of a protracted recession in the global economy. At the same time, the Reserve Bank of New Zealand is widely expected to hold the benchmark interest rate steady at the record-low of 2.50% this month as the central bank anticipates an economic recovery later this year, and long-term expectations for higher borrowing costs could drive demands for the high-yielding currency throughout July. After reaching a high of 0.7220 in August, the NZD/USD slipped to a low of 0.4894 in March following the drop in risk appetite however, the rebound in market sentiment paired with the improved outlook held by the RBNZ may continue to drive the exchange rate higher as investors expect the central bank to tighten policy over the next 12 months. Nevertheless, RBNZ Governor Alan Bollard said that the recent appreciation in the exchange rate could hamper prospects ‘for an export-led recovery’ following the June policy meeting, and the comments suggests that the central bank may intervene in the currency markets to stem the downside risks for growth and inflation. Over the next few hours of trading, we may see the kiwi-dollar continue to retrace the sell-off from earlier this week and make an attempt to push back above 63.30-40 (61.8% Fib) however, as market liquidity thins ahead of the Fourth of July holiday weekend, we may see the pair hold steady throughout the session, and may end the week lower on the back of falling commodity prices. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
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