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New Zealand Dollar Dips after Hawkish Federal Reserve

New zealand dollar

The New Zealand dollar remains on the defensive against the U.S. dollar after a hawkish sounding U.S. Federal Reserve Board. The NZD/USD currency exchange rate is trading near a monthly low price point around 0.6985.

On Wednesday, the U.S. Federal Reserve Board announced they will likely start tapering their monthly asset purchases by November. The Federal Reserve also suggested that interest rate hikes could follow more quickly than first expected. The U.S. central bank seems ready to reverse their coronavirus pandemic (Covid-19) policies.

The U.S. dollar found support from a hawkish sounding central bank. This was the Federal Reserve Board signaling that they have confidence in future economic growth, inflation and the labor market.

Economic projections showed nine of 18 Federal Open Market Committee members are ready to normalize monetary policy by the end of the year to cool down consumer prices which are running hot around 4.2 percent. The Federal Reserve Board’s target is at or just above two percent.

Today, the Bank of England will announce monetary policy and interest rates. The Bank of England will also publish economic projections and hold a press conference.

Daily New Zealand Dollar Technical Analysis (NZD/USD)

Looking at the above four hour MT 4 price chart, the New Zealand dollar is challenging the fifty percent Fibonacci level. This is also a key horizontal support area from late August. The relative strength index (RSI) is not in favor of the NZD/USD sellers. This could signal a correction higher from around 0.6980.

On the upside, the New Zealand dollar has upside technical resistance at 0.70. The 200 hour exponential moving average comes into play at 0.7040/1. The next layer of technical resistance is at the September low price point at 0.7095 with 0.71 then coming into focus.

A daily close below 0.6980 opens the door to challenge the 25 August low price level in play at 0.6930. The next layer of support lines up at 0.69 with the August monthly low of 0.6805 coming into the picture.

About David Frank

David has his MA and PhD in Economics. He is a technical analyst who has been trading in the Forex world for over a decade. As an analyst and trader, David believes in the big picture by blending together technical analysis with the fundamentals behind the scenes in the Forex and Bond markets. David’s trading strategy is unique. He blends an understanding of fundamental and macroeconomics with technical analysis to offer a unique view into Forex. He applies several strategies including carry long positions, to take advantage of high yields in non-volatile markets, as well as using quicker, chart related analysis for day trading.

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