The New Zealand Dollar is trading sharply higher early Tuesday after a strong business survey pulled forward rate hike expectations there to as soon as November. Meanwhile, demand for the U.S. Dollar was mostly flat as investors wait on the minutes from the Federal Reserves meeting in June when it surprised markets with a hawkish shift. They are due to be published on Wednesday.
At 03:02 GMT, the NZD/USD is trading .7077, up 0.0051 or +0.72%.
A business survey in New Zealand showed a sharp improvement in confidence, a willingness to raise prices and a record high level of firms facing hiring issues – prompting ASB Bank to pull forward rate hike expectations to just four months away.
“It is very clear that record amounts of monetary stimulus are no longer needed to support the economy and inflation risks are getting too high for comfort,” said ASB senior economist Jane Turner in a note. “We now expect the RBNZ to start lifting the OCR from November this year (previously May 2022).”
Swaps pricing also shifted to point to a roughly ¾ chance of a November hike which, if it occurred, would put the Reserve Bank of New Zealand (RBNZ) on par with the super-hawkish Norges Bank which is alone among G10 banks in forecasting a 2021 hike, according to Reuters.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart, but momentum has shifted to the upside with the confirmation of Fridays closing price reversal bottom and the formation of a secondary higher bottom.
A trade through .7095 will change the main trend to up. A move through .6948 will signal a resumption of the downtrend.
On the downside, the support is a pair of 50% levels at .7027 and .7009.
On the upside, potential resistance is a pair of 50% levels at .7083 and .7120, followed by a Fibonacci level at .7166.
The direction of the NZD/USD on Tuesday is likely to be determined by trader reaction to the 50% level at .7083.
A sustained move over .7083 will indicate the presence of buyers. Taking out .7095 will change the main trend to up. This could trigger a surge into a short-term retracement zone at .7120 to .7166. The latter is a potential trigger point for an acceleration to the upside.
A sustained move under .7083 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the pair of 50% levels at .7027 and .7009. If the latter fails as support then look for the selling to possibly extend into the main bottoms at .6948 and .6923.
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