New Zealand Dollar Forecast: Bull Moves Back on Track?

New Zealand Dollar Outlook:

• The New Zealand Dollar bullish attempt in early September was rejected. Price action at the end of the month tells a different story.
• Bounces at key support levels in NZD / JPY and NZD / USD rates suggest that bulls are ready to make another attempt to extend their August bullish runs.
• According to the IG Customer Sense Index, New Zealand Dollar still has mixed prejudice, but longings are rapidly dissipating.

Kiwi Signals Risk

While New Zealand’s vaccination is growing – currently with 75% of adults having had at least one shot – Prime Minister Jacinda Ardern said blockades could end soon when the country reaches a 90% vaccination rate.

While New Zealand has moved away from its most stringent blockades (minus Auckland), this is likely to be the case the Reserve Bank of New Zealand will raise its main interest rate when it meets again in early October (current prices in the face of sudden index exchanges suggest a 91% chance of a 25-bps rate hike).

With fears of Chinese Evergrande disappearing into the background, and U.S. securities marching again, it may happen that the New Zealand Dollar is well positioned to follow risk trends higher. Vere, tli Kiwi An bullish explosive attempt in early September was rejected. But priza ago in rates NZD / JPY and NZD / USD at the end of the month tells a different story.

TECHNICAL ANALYSIS OF NZD / JPY RAT: DAY-TO-DAY (March 2020 to September 2021) (CHART 1)

When we last checked the two major NZD crosses, it was noted that “the withdrawal of NZD / JPY rates from their July high (78.77) may show a symptom of broader risk trends rather than any weakness in New Zealand Dollar itself. In the grand plan, the tiny dip in early September may be nothing more than a profit after profit after an exceptionally strong course to close August. ”

The pair remains above their daily 5-, 8-, 13- and 21-EMA envelope, which begins to line up in an upward consecutive order. Daily MACD emitted an bullish crossover signal over its signal line, and daily Slow Stochastics began to advance through its midline. Having now treated the resistance channel from May to August as support in recent days, it appears that NZD / JPY rates are preparing for another at the July high at 78.77.

TECHNICAL ANALYSIS OF NZD / USD TAR: EVERY DAY (March 2020 to September 2021) (TABLE 2)

NZD / USD rates are again positioned to try to break above the downward trend line of the February and May swing. The low cut this week was close to the 23.6% Fibonacci retracement of the 2020 low / 2021 range at 0.6994, suggesting that a new “higher low” has formed in relation to August.

Momentum is becoming bullish again, although the daily EMA envelope is not yet in bullish consecutive order. Daily MACD is on the cliff of bullish crossover while it is above its signal line, and daily Slow Stochastics have come out of oversold territory with a sense of urgency.

While NZD / JPY rates may have a slightly more optimistic outlook at the moment, NZD / USD rates are similarly positioned for another higher one soon.

IG Customer Sensation Index: NZD / USD RAT Forecast (September 23, 2021) (Chart 3)

NZD / USD: Retail data shows that 37.06% of traders are net-long with the ratio of short to long traders at 1.70 to 1. The number of net-long traders is 28.62% lower than yesterday and 14.29% less than last week, while the number of net-short traders is 0.79% lower than yesterday and 22.59% lower than last week.

We usually consider an opposing view of crowd sentiment, and the fact that traders are short suggests that NZD / USD prices may rise.

Positioning is net-shorter than yesterday but less net-short than last week. The combination of current sentiment and recent changes gives us a further mixed trading bias of NZD / USD.

— Written by Christopher Vecchio, CFA, Senior Strategist