NZD/USD to 72 Cents?

NZD/USD to 72 Cents?

NZD/USD to 72 Cents?

The New Zealand dollar has been surprisingly strong despite weaker service sector activity and dovish comments from the Reserve Bank of New Zealand. Last Monday RBNZ Assistant Governor McDermott said inflation is expected to be low and therefore further policy easing will be required. Yet NZD was the strongest performing currency today because investors are skeptical about the central bank’s willingness to lower rates at a time when manufacturing activity is growing at its fastest pace since January. In other words the CPI report could reshape expectations for RBNZ easing. If CPI growth slows to 0.1% from 0.4% like economists expect, the central bank’s concerns will be justified and NZD/USD will give up its recent gains quickly. However if CPI grows by 0.2% or more, we may only see a modest decline in NZD and if year over year growth holds steady at 0.4% or better yet accelerates, NZD/USD could make a run for 72 cents.

Technically, NZD/USD certainly appears poised to make a run for 72 cents. There’s no major resistance in this latest rally until 0.7170 and the main level to watch is actually 0.72 cents because that’s where the 20-day SMA and 38.2% Fibonnaci retracement 2014 to 2015 sell-off converge. If NZD/USD drops below Monday and Friday’s low near 0.7078 then 70 cents becomes the new target.

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