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NZDUSD Market Update

11/9/2022 2:42 PM

The NZD/USD pair has continued to grow since the middle of last month and is currently trading around 0.5950.

The New Zealand economy continues to be under pressure from the growing risks of a global recession and high inflation. Currently, the consumer price index is 7.2%, which is significantly higher than the Reserve Bank of New Zealand (RBNZ) target range of 1.0-3.0%, and this year it may reach 5.08% instead of the expected 4.86%, and in two years – 3.62% instead of 3.07%. Accordingly, the rate of the indicator will decline more slowly than expected, and the RBNZ will probably have to take new measures to tighten monetary policy. Meanwhile, the current increase in the interest rate is already negatively affecting the performance of the national economy. Last week, the regulator said that an increase in household spending on debt servicing and a decrease in their welfare would limit consumption next year, which could lead to a recession.

Nevertheless, the New Zealand currency continues to strengthen, as the USD looks less attractive for investment due to political uncertainty in the USA. Currently, investors are waiting for the results of the midterm elections to the US Congress, as well as the publication of October inflation data. As a result of the vote, the Democratic Party may lose its majority in both the Senate and the House of Representatives, which will create difficulties in implementing the economic policy of the current administration of President Joe Biden. Inflation in October is likely to remain high: the consumer price index may reach 8.0%, and the base index - 6.5%, which implies a further serious increase in the US Fed interest rate and increased pressure on the US economy.

In the long term, the downtrend is still maintained, although at the moment the price is correcting upwards. Now it is close to 0.5981 (Murray [4/8]), the breakout of which will create the prospect of growth to the levels of 0.6100 (Murray [6/8], the upper limit of the descending channel), 0.6225 (Murray [7/8]). In case of a breakdown of the middle line of the Bollinger Bands around 0.5790, he decline will resume to 0.5615 (Murray [2/8]), 0.5493 (Murray [1/8]).

Technical indicators confirm the continuation of growth: the Bollinger Bands and the Stochastic are directed upwards, the MACD histogram increases in the positive zone.

Resistance levels: 0.5981, 0.6100, 0.6225. | Support levels: 0.5790, 0.5615, 0.5493.

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