NEW ZEALAND DOLLAR - TECHNICAL OUTLOOK: NZD/USD

The New Zealand currency has encountered substantial resistance versus the US dollar, increasing the potential of a short-term range extension.

The three-month-long rise in the NZD/USD looks to have come to an end as it approaches a strong convergent barrier: the December high of roughly 0.6500, the 89-week moving average, which is just below the 200-week moving average. Previously, on moderate momentum, the pair touched a 6-month high in December - the 14-week Relative Strength Index was stopped at approximately 60, comparable to prior corrective rallies (as the chart shows). Readings over 60-65, on average, boost the chance of a break above resistance.

NZD/USD Weekly Chart

Given the rate and magnitude of the climb since the end of 2022, the range situation may persist in the short future. A more limited range would be 0.6150-0.6500, which would include the December high and the early-January low. A somewhat larger range, incorporating the 200-week moving average and the 50% retracement of the end-2022 gain, maybe 0.6000-0.6600.

NZD/USD Daily Chart

Looking beyond the immediate term, the chances are improving that the worst is over for the NZD/USD, which maintained important support in October around the 2020 low of 0.5465. Furthermore, the ensuing recovery has been a complete retracement of the August-October decline - the previous supply point. In general, when a market can completely retrace the previous supply point, it indicates that selling pressure has been exhausted. In such cases, the route of least resistance tends to be sideways to up.

Stay tuned for more market trading insights.

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