The NZD/USD pair jumped to 0.6815 following a disappointing US ISM Manufacturing PMI report. The weak factory activity reported by the US led to a decline in the US Dollar’s appeal. This development has sparked speculation that the Federal Reserve may begin reducing interest rates starting from the September meeting, causing the US Dollar Index (DXY) to slump to 104.25.
Investors continue to show confidence in the New Zealand Dollar as they anticipate that the Reserve Bank of New Zealand (RBNZ) will not lower interest rates this year. There are even discussions that the RBNZ may consider hiking its Official Cash Rate further. RBNZ Governor Adrian Orr has already indicated that additional rate hikes will not be considered as long as inflation expectations remain stable.
In terms of technical analysis, NZD/USD is attempting to break a Bullish Flag chart formation in a four-hour timeframe. The asset is currently finding support near the 50-period Exponential Moving Average (EMA) at 0.6126, indicating bullish momentum. The 14-period Relative Strength Index (RSI) has also climbed above 60.00, further strengthening the bullish outlook for the New Zealand Dollar.
If the pair manages to break above the resistance level of 0.6200, it could target the January 15 high near 0.6250 and the January 12 high near 0.6280. On the other hand, a downside move could occur if the pair breaks below the April 4 high around 0.6050, leading to a possible decline towards the psychological support level of 0.6000 and the April 25 high at 0.5969.
Overall, the recent developments in the US manufacturing sector have provided a boost to the New Zealand Dollar against the US Dollar. With expectations of stable interest rates in New Zealand and a weakening US Dollar, the NZD/USD pair is showing signs of further upside potential in the near term. Investors will be closely watching for any new developments in both the US and New Zealand monetary policy.
