NZD/USD Price Forecast: Weakens below 0.5900, but staying supported above 100-day SMA
The NZD/USD pair trades with mild losses around 0.5875 during the early European session on Wednesday. Escalating tensions in the Middle East boost a safe-haven currency such as the US Dollar (USD) and act as a headwind for the pair.
The New Zealand Dollar (NZD) experienced a slight decline to 0.5875 during early European trading on Wednesday. Rising tensions in the Middle East contributed to the greenback's strength, creating headwinds against the NZD. Major General Ali Abdollahi, Iran's Chief of Staff, cautioned Persian Gulf nations against aiding the US military, stating that any assistance is akin to supporting US forces.
However, traders reduced expectations of a US Federal Reserve rate hike during the September meeting following unexpected job losses in July and restrained inflation data. This factor may hinder the downward momentum of the NZD. Benign inflation and signs of a softening US labor market make a September Fed rate hike highly improbable.
Scotiabank analysts, led by Shaun Osborne, noted that the NZD has a slight upward bias due to its trading position above the 12-month average. However, they maintain skepticism about the market's expectations of two additional Reserve Bank of New Zealand (RBNZ) rate hikes by the end of the year. Despite strong domestic activity, Osborne highlighted that inflation expectations appear well-grounded, casting doubt on further interest rate increases by the RBNZ.
On the chart, NZD/USD shows a slight bullish outlook, with the pair trading above the 100-day simple moving average (SMA) and the Bollinger Bands' middle SMA. The Relative Strength Index (14) remains around 55, indicating a neutral-to-positive sentiment, suggesting potential upside but not an overextended condition. The nearest resistance level is the August 17 high of 0.5926, with the next hurdle at the Bollinger upper band near 0.5940.
A bullish breakout above this level could propel the NZD towards the psychologically significant 0.6000 mark. Conversely, the immediate support lies at the Bollinger middle band around 0.5855, followed by the 100-day SMA at 0.5830. Should the NZD retreat further, the lower Bollinger band near 0.5770 would serve as a more substantial support level.
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