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The NZDUSD Develops a "Bearish" Signal

1/31/2023 11:00 AM

The NZD/USD pair shows a confident decline, developing a "bearish" signal formed at the beginning of the week. The instrument is testing the level of 0.6450 for a breakdown, updating local lows from January 23.

The positions of the New Zealand dollar are vulnerable before the US Federal Reserve meeting, the results of which will be known tomorrow. The regulator is expected to raise the interest rate by 25 basis points, but the Chair of the Fed, Jerome Powell, may point to continued "soft tightening" of monetary policy in the near future. One way or another, analysts expect that the American currency will receive a new impetus to growth, preparing for Friday's publication of the January report on the US labor market.

Some support for the instrument is provided by statistics from China, where there is a gradual recovery in business activity. The Manufacturing PMI from the National Bureau of Statistics (NBS) in January corrected from 47.0 points to 50.1 points, which turned out to be higher than market expectations at the level of 49.7 points, and the Non-Manufacturing PMI increased from 41.6 points to 54.4 points, well ahead of forecasts for growth to 51.0 points.

In addition to the results of the US Federal Reserve meeting, in the near future, analysts will evaluate the publication of statistics on the labor market in New Zealand for the fourth quarter of 2022. Current forecasts suggest a slowdown in Employment growth from 1.3% to 0.7%, while maintaining the Unemployment Rate at around 3.3%. Meanwhile, analysts believe the country's new Prime Minister, Chris Hipkins, may backtrack on some of the measures taken by his predecessor, Jacinda Ardern, ahead of an October election in which the ruling Labor Party, to which Hipkins belongs, hopes to win. The official noted that the government will focus on supporting households facing rising utility bills, food inflation and the inability to pay mortgages. In addition, he stressed that New Zealand's relationship with China is "incredibly important from an economic point of view".

Bollinger Bands in D1 chart demonstrate flat dynamics. The price range is narrowing from below, reflecting the multidirectional dynamics of trading in the short term. MACD reversed into a descending plane, having formed new sell signal (located below the signal line). Stochastic retains a more confident decline, but at the moment it is rapidly approaching its lows, indicating the risks of oversold New Zealand dollar in the ultra-short term.

Resistance levels: 0.6500, 0.6535, 0.6600, 0.6650. | Support levels: 0.6450, 0.6400, 0.6350, 0.6288.

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