The New Zealand dollar has remained elevated recently, despite weakness in risk sentiment. One of the main reasons for the rise in the New Zealand dollar is the hawkish stance of the Reserve Bank of New Zealand. The central bank has increased key interest rates several times recently, and looks set for one more increase at the upcoming meeting. However, one important point to note here is that the central bank has also mentioned time and again that the rise in the New Zealand dollar might hurt the economy, and they might intervene if required at some point in time. So, traders should be very careful about chasing the current rise in the New Zealand dollar.
Technically, the pair has recently breached the monthly highs and traded higher. Earlier during the Asian session, New Zealand’s imports, exports and trade balance data were released by Statistics New Zealand. The outcome was mixed, as the report mentioned that exported goods rose to $4.6 billion in May 2014, and the trade balance for May 2014 had a surplus of $285 million, missing expectations of $300 million. The New Zealand dollar was seen trading higher after the data release and traded as high as 0.8775 against the US dollar.
There is a trend line on the weekly time frame for NZD/USD. This trend line is now coinciding with the previous high of 0.8840. This level holds a lot of importance in the medium term for the NZD/USD pair, as sellers may appear around the mentioned resistance zone.
Moreover, the 1.236 extension of the last down-move from the 0.8630 high to 0.7682 low is around the 0.8900 level, which could also act as a major barrier if the pair manages to climb towards it.
- IKOFX Technical Team
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