The NZDUSD currency pair has fully justified the expectations of descending to the spring lows of 2020 placed on it. The US dollar index is habitually renewing its multi-year peaks, leaving the risky currencies with no chance of a sustainable recovery. And so far, the whole set of factors is playing in favor of the current trend continuation.
Yesterday, the most important Fed meeting was held. Market participants were mostly interested not even in the fact of the key rate hike (the third hike by 0.75% in a row was quite in line with market expectations), but in the Fed forecasts for the coming months. Just a little hint about slowing down the pace of monetary policy tightening might significantly help the stock markets and weaken the dollar, but Jerome Powell has remained adamant.
Certainly, the current Fed chairman is far from the fame of Paul Volcker, who in the 1980s led the key rate to an incredible 20% by today’s standards. To the US economy with a national debt of $30 trillion (and that’s even without including the credit obligations of corporations and households), the interest rate of 4.5%, that the Fed is now awaiting by the end of the year, might cause huge problems.
However, just for the dollar all these factors aren’t problematic. The higher the level of rates in the US, the more attractive the American currency becomes in comparison with all of its competitors in global financial markets. And while the Fed policy tightening cycle is continuing, the downtrend for the NZDUSD is out of doubts.
There isn’t much good news for the New Zealand currency. The key rate of 3% might only slow down the fall of the national currency, but not stop it. The continuing growth of the trade balance deficit isn’t encouraging for the NZDUSD buyers either.
A small rebound in the beginning of September eliminated the oversold state marked by the RSI indicator, and now the NZDUSD has no obstacles for renewing its lows. The bottom of 0.547 recorded in March 2020 still is quite far, but the level of 0.56 is within reach in a short-term perspective.
Following trading strategies can be offered:
Sell NZDUSD in the range of 0.58-0.585. Take profit – 0,56. Stop loss – 0,595.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.
