It seems that the downward trend for the New Zealand Dollar to US Dollar pair will dominate in the upcoming period, as it has fallen by about 10% since its peak on September 30, 2024, at 0.6391, reaching a low of 0.5730 today. This pair is currently trading near the 0.5750 levels. It has also dropped by about 9% since the beginning of the year to date.
Recent New Zealand economic data shows that the New Zealand economy is experiencing weakness, with the following highlights:
- Retail sales via electronic cards declined on a monthly basis in November, recording a 0% change, which is lower than the previous reading of 0.7%.
- The building permits index fell on a monthly basis in October, showing a contraction of 5.2%, which is worse than the previous reading of 2.4%.
- The business PMI (Purchasing Managers’ Index) for November showed a contraction of 45.5 points, which is worse than the previous reading of 45.8 points.
It is worth noting that a key factor weighing negatively on the NZD/USD pair is the strength and resilience of the U.S. economy, with most U.S. economic data outperforming analysts’ expectations.
In its last meeting on November 27, 2024, the Reserve Bank of New Zealand cut interest rates by 50 basis points, from 4.75% to 4.25%, in line with market expectations. This rate cut is the third consecutive one this year, following a 25-basis point cut and a subsequent 50-basis point reduction. Expectations point to further cuts in the near future.
Markets are closely awaiting the U.S. Federal Reserve’s interest rate decision today, with expectations for a 25-basis point reduction from 4.75% to 4.50%. All eyes will be on Federal Reserve Chairman Jerome Powell’s speech and tone, as well as the dot plot, which will provide the Fed’s outlook on the interest rate path for the coming year. This will have a significant impact on the movements of other financial instruments.
Additionally, New Zealand’s GDP data is expected to be released on Thursday, December 19, 2024. The forecast is for the index to show a contraction of 0.4% year-on-year in Q3, which is a slightly better performance than the previous reading of -0.5%. Accordingly, caution is advised, as any reading higher than expectations for GDP could have positive implications for the NZD/USD pair.
From a technical perspective, if the pivot point at 0.5765 is broken for the NZD/USD pair, it is likely to target support levels at 0.5736, 0.5721, and 0.5692. On the other hand, if the pivot point is surpassed, resistance levels may be targeted at 0.5780, 0.5809, and 0.5824. As for the Relative Strength Index (RSI), which is currently around 35 points, it indicates negative momentum for the NZD/USD pair.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
