NZD/USD Rally Could Lose Momentum Soon

NZD/USD Rally Could Lose Momentum Soon

NZD/USD Rally Could Lose Momentum Soon

The New Zealand dollar was the best performing currency of the day. In the short span of 7 trading days, NZD/USD has risen from 63 cents to 66 cents. No economic reports were released overnight but NZD is still riding on yesterday’s Global Dairy Trade auction high. Milk prices increased for the fourth auction in a row, solidifying expectations that dairy prices have bottomed. As New Zealand’s most important export, this recovery cuts the need for further easing from the Reserve Bank of New Zealand because the drop in prices was the primary motivation for their decision to lower rates 3 months in a row between June and September. If prices continue to stabilize, the RBNZ will be done for the year.

Technically resistance in NZD/USD is at 0.6710, the August high and we believe that the rally could extend to that level but further gains may be difficult. The 100-day SMA also sits right above current levels. If NZD/USD manages to rise above 0.6750, the next stop should be 0.6870, the 50% Fibonacci Retracement of the 2009 to 2014 rally. Support is at 64 cents, the 61.8% Fib of the same move.

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