Solid News

NZDUSD is Falling

8/19/2022 2:11 PM

After the breakdown of the support level of 0.6340, the NZD/USD pair continues to decline to the area of 0.6205 against the backdrop of the US Federal Reserve's rhetoric aimed at tightening monetary policy.

The US dollar is strengthening its position against all risky assets, including the New Zealand currency. Michelle Bowman, a member of the Federal Open Market Committee of the US Federal Reserve, said on Wednesday that the regulator is likely to raise interest rates by another 0.50%-0.75% at its September meeting, as officials believe that in order to effectively fight inflation the value should be slightly above 3.00%. The next day, Bowman's words were confirmed by the Chairman of the Federal Reserve Bank (FRB) of St. Louis, James Bullard, according to whom the adjustment of the indicator should be at least 0.75% in September and eventually bring the value to the area of 3.75%-4.00% by the end of the current year. Thus, investors are already pricing in the "hawkish" position of the authorities in the price of the US currency, which, in turn, acts as a catalyst for the growth of the US dollar.

The Reserve Bank of New Zealand (RBNZ) raised interest rates by 50 basis points this week. The market reacted to the actions of the regulator by depreciating the national currency, as inflation in the country continues to grow rapidly, reaching the level of 7.3% in annual terms, which casts doubt on the success of the ongoing monetary policy.

The long-term trend has regained its former downward direction. After the breakdown of the support level of 0.6340, the target for sales was the level of 0.6205, which is currently approaching the price. After testing this level, one should analyze the reaction of market participants and, if the level is broken down, one can join the sale of the asset to the July low at 0.6055.

The mid-term trend has changed to a downtrend this week. The key support at 0.6328–0.6314 was broken. The next sell target is target zone 2 (0.6188–0.6174). The key resistance of the trend is shifting to the levels of 0.6380–0.6366. New sales can be looked for from this area.

Resistance levels: 0.6345, 0.6460. | Support levels: 0.6205, 0.6055.

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