Selling NZD/USD Below Key Resistance

Posted Tuesday, September 19, 2023 by
Skerdian Meta • 2 min read

The US dollar has been bullish since July on a less dovish FED as they are still keeping the rate case open after September, since they are widely expected to pause this month. Stronger fundamental data is showing that the US economy will avoid a recession which has given the USD a boost, luring investors looking for a safe-haven currency.

This week there are just a few significant economic announcements, with tomorrow’s FOMC rate decision being the most significant. The market will pay closer attention to the Dot Plot and Fed Chair Powell’s press conference, even though he’s likely to reiterate that they remain data reliant, since the Fed is expected to hold rates steady.

Commodity dollars on the other hand have been under pressure for almost two months. Despite this, there have been unforeseen bad developments in China’s economy, which have put pressure on risk assets. NZD/USD slipped below 0.60 earlier this month and the 20 SMA (gray) has turned into resistance on the daily chart now.

Although, we have seen some slight bullish momentum since early last week, but the overall tendency in this pair is still negative until NZD/USD breaks above the high of 0.6015 set in early September. A breakthrough over 0.6015 would push the price above the 20 daily SMA and may first pave the road for 0.6100.

However, that’s unlikely given the events in New Zealand. The RBNZ maintained its official cash rate at a tight level for the foreseeable future to ensure that inflation returns to goal. Recent New Zealand inflation and employment numbers were unexpectedly strong, but the PMIs are still falling deeper into contraction. The central banks are keeping a careful eye on the wage growth because it has fallen short of predictions as well.

Besides that, the recent retail sales in New Zealand were still quite poor. The Q2 GDP is expected to show an expansion of 0.4% but that comes from two negative readings, indicating a recession previously. So, we decided to open a sell NZD/USD signal below the 20 SMA since it keeps rejecting the price.