The NZD/USD pair continues its downward trajectory, lingering around 0.6150, with investors eagerly awaiting the Reserve Bank of New Zealand (RBNZ) rate decision. The Kiwi is facing pressure from a stronger US Dollar, driven by positive economic data in the US and revised rate cut expectations. Meanwhile, the RBNZ is expected to continue easing monetary policy, which could further weigh on the NZD in the short term. Let’s take a closer look at the technical landscape across various timeframes and assess the key levels to watch for traders.
Key Takeaways
- NZD/USD trades near 0.6150, facing selling pressure due to a stronger US Dollar.
- RBNZ is expected to cut the OCR in its October meeting, with further cuts likely in 2024.
- The US Non-Farm Payrolls (NFP) data continues to support the USD, decreasing the likelihood of aggressive Fed rate cuts.
Technical Analysis
Daily Chart Analysis
The daily chart reveals a significant downward movement from the September highs near 0.6350. The pair has broken below the Equilibrium zone, and the recent Break of Structure (BOS) around 0.6300 suggests that the pair could remain bearish in the near term. The next major support level to watch is around 0.6150, with a stronger zone around 0.6100, which aligns with a previous discount zone.
- Resistance: 0.6225 (Previous Day’s High), 0.6300 (Break of Structure)
- Support: 0.6150, 0.6100, and the significant strong low at 0.5950.
A sustained break below 0.6150 could accelerate the decline towards 0.6100 and even test 0.6000. However, if the pair holds above 0.6150, a minor recovery towards 0.6225 may be possible.
4-Hour Chart Analysis
On the H4 chart, NZD/USD has clearly broken out of the Premium zone above 0.6350 and has been sliding downward towards the discount zone near 0.6100. The current price action shows that the Change of Character (CHoCH) and BOS around 0.6225 led to a sharp decline. The next area of interest is the Previous Week Low (PWL) at 0.6100.
- Key Resistance: 0.6225 (Equilibrium), 0.6300
- Key Support: 0.6100, 0.6000
The pair remains bearish below 0.6225, and any bullish recovery is likely to face stiff resistance around this zone.
1-Hour Chart Analysis
The 1-hour chart reveals a sharper downtrend, with the pair consolidating around the 0.6150 mark. The Change of Character (CHoCH) observed at 0.6225 has resulted in increased selling pressure, and the pair is now testing its Previous Day Low (PDL). If the pair breaks below 0.6150, we could see further declines toward 0.6100.
- Resistance: 0.6200 (Previous Hour High), 0.6225 (Equilibrium)
- Support: 0.6150, 0.6100
A bearish outlook remains intact as long as the pair trades below 0.6200 on the H1 chart.
Economic Data
Several key economic factors are driving the NZD/USD:
- RBNZ: The RBNZ is widely expected to cut the Official Cash Rate (OCR) by another 25 basis points, bringing it down to 5.00%. Some analysts predict more aggressive cuts could be in store as the New Zealand economy faces mounting growth pressures.
- US Non-Farm Payrolls (NFP): Last week’s stronger-than-expected NFP report has bolstered the case for a slower pace of Fed rate cuts. The USD remains supported by resilient labor market data, which is weighing on the NZD.
- Fed Rate Expectations: Traders have scaled back expectations of a 50 bps rate cut from the Fed in November, with a more modest 25 bps cut now priced in, further supporting the US Dollar.
Trading Recommendations
For traders looking to capitalize on the current NZD/USD momentum, here are some strategic approaches:
For Day Traders:
- Sell on rallies: Look for short opportunities near the 0.6200-0.6225 resistance zone, with stops above 0.6250.
- Target the downside: Potential profit levels are 0.6150 and 0.6100, with an extended target near 0.6050.
For Swing Traders:
- Short positions remain favorable as long as the price stays below 0.6225. A sustained break below 0.6100 could open up further downside toward 0.6000.
- Watch for a potential bounce: If the pair fails to break below 0.6100, a recovery toward 0.6250 could offer a counter-trend buying opportunity.
Conclusion
The NZD/USD remains under significant bearish pressure, with the upcoming RBNZ rate decision and strong US Dollar dynamics driving market sentiment. Traders should keep a close eye on key support levels around 0.6150 and 0.6100, as a break below these levels could accelerate the downtrend. Conversely, a recovery above 0.6225 might indicate some relief for the Kiwi, although the broader bias remains bearish.
