New Zealand Greenback Outlook:
- NZD/JPY has damaged by way of the 2019 excessive on its strategy to a recent yearly excessive, whereas NZD/USD simply reached its excessive for 2021.
- The RBNZ meets for the primary time this 12 months within the coming week, and policymakers appear extremely more likely to push off the dialogue round destructive rates of interest. Nevertheless, just like the BOC and RBA, they too could complain about FX markets.
- Per the IG Shopper Sentiment Index, the New Zealand Greenback has a bullish bias within the near-term.
New Zealand Greenback Flexes its Muscle tissue
As the one main developed forex whose financial system prevented a major outbreak of COVID-19, the New Zealand Greenback has been on the forefront of hypothesis that the worldwide financial system is getting again on observe. NZD/JPY hit recent yearly highs for 2021 to finish the week, whereas additionally breaking by way of to its highest degree since 2018. In the meantime, NZD/USD charges jumped to their 2021 excessive at 0.7315 earlier than easing again.
There seem like few obstacles in the best way of additional Kiwi power. In any other case, the upcoming Reserve Financial institution of New Zealand price choice might show to be a wrinkle. The RBNZ meets for the primary time this 12 months within the coming week, and policymakers appear extremely more likely to push off the dialogue round destructive rates of interest. Nevertheless, just like the BOC and RBA, which have prompt that their currencies are appreciating for causes past their management – primarily, the Federal Reserve – the RBNZ could too complain about FX markets.
Advisable by Christopher Vecchio, CFA
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NZD/JPY RATE TECHNICAL ANALYSIS: WEEKLY CHART (September 2014 to February 2021) (CHART 1)
In our final New Zealand Greenback replace, it was famous that “we’re a long-term timeframe of ‘shopping for the dips’ in NZD/JPY charges by way of at the very least early-2021.” Overcoming its 2019 highs, NZD/JPY charges are on observe with what’s our longer-term bullish viewpoint: a bottoming course of has commenced. NZD/JPY charges are operating excessive following their break above the descending trendline from the January 2014, July 2017, December 2018, and August 2020 highs.
Momentum continues to strengthen on weekly timeframes. Having now overtaken the 50% Fibonacci retracement of the 2015 excessive/2020 low vary at 76.77, NZD/JPY charges are above their weekly 4-, 13-, and 26-EMA envelope. Each weekly MACD and Sluggish Stochastics are at their highest ranges since early-2017, providing additional affirmation that we’ve seen a significant change in habits in NZD/JPY charges on a longer-term foundation.
NZD/USD RATE TECHNICAL ANALYSIS: DAILY CHART (February 2020 to February 2021) (CHART 2)
NZD/USD charges poked by way of to their yearly excessive at the moment, reaching 0.7315 however going no additional. However, the symmetrical triangle consolidation that started in mid-December has given strategy to a bullish breakout try, which in context of the previous transfer requires a bullish continuation effort. Now that the bottom of the triangle has been reached on the yearly excessive, it could be the case that NZD/USD charges will start their subsequent leg up.
IG Shopper Sentiment Index: NZD/USD RATE Forecast (February 19, 2021) (Chart 3)
NZD/USD: Retail dealer information exhibits 27.69% of merchants are net-long with the ratio of merchants brief to lengthy at 2.61 to 1. The variety of merchants net-long is 39.35% decrease than yesterday and 34.49% decrease from final week, whereas the variety of merchants net-short is 10.34% increased than yesterday and seven.68% increased from final week.
We usually take a contrarian view to crowd sentiment, and the actual fact merchants are net-short suggests NZD/USD costs could proceed to rise.
Merchants are additional net-short than yesterday and final week, and the mixture of present sentiment and up to date adjustments offers us a stronger NZD/USD-bullish contrarian buying and selling bias.
— Written by Christopher Vecchio, CFA, Senior Foreign money Strategist