NZD/USD Forex Signal: Risk Sentiment Punishes Kiwi

The outlook for the pair is still bearish even after forming a morning star pattern.

Bearish view

  • Set a sell limit at 0.6197 and a take profit at 0.6127.
  • Add a stop-loss at 0.6242.
  • Lead time: 1-2 days.

Bullish view

  • Set a buy-stop at 0.6197 and a take-profit at 0.6242.
  • Add a stop-loss at 0.6100

The NZD/USD pair has seen a strong downtrend as investors embrace risk sentiment. The pair crashed to a low of 0.6127, which was the lowest level since May 25, 2020. It has been falling for the past six consecutive weeks and is down 17% from its highest point. raised in 2021.


Feeling of risk

The NZD/USD pair has slumped over the past few months as investors turn to the safety of the US Dollar. The dollar index hit a multi-year high of over $106 as investors, companies and individuals move towards its safety.

The strength of the greenback is mainly due to soaring inflation around the world and the actions of the Federal Reserve and other banks. The bank has already raised interest rates by 150 basis points and Jerome Powell has hinted that more is yet to come.

As a result, many people shifted their currency holdings from their local currencies to the higher-yielding US dollar. As a result, the euro and the Japanese yen slumped to their lowest levels in over 20 years.

Meanwhile, the New Zealand dollar also fell due to the country’s relatively weak economic data. Data released on Tuesday showed business confidence fell to -65% in the second quarter as businesses continue to grapple with rising inflation. Weak business and consumer confidence is generally a negative sign as it tends to affect spending.

New Zealand is a country rich in raw materials. Thus, the economy tends to do well when certain prices increase. Data released by ANZ showed that the commodity price index fell 0.4% in May.

Therefore, investors will be waiting for the next RBNZ interest rate decision scheduled for next week. Like other banks, analysts believe the bank will rise again even as the country faces stagflation.

NZD/USD Forecast

The four-hour chart shows that the NZD/USD pair has been in a strong downtrend for the past few days. It managed to break below the important support levels at 0.6242 and 0.6195. The pair also formed a descending channel which is displayed in purple and moved below the 25-day moving average.

Therefore, the outlook for the pair is still bearish even after forming a morning star pattern. As such, the next key level to watch will be this week’s low at 0.6125.


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