NZD Attempts Another Breakout; Flashes First Overbought Signal In 2017

DailyFX Table

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

NZD/USD

0.7217

0.7223

0.7188

The New Zealand dollar outperforms its major counterparts, with NZD/USD climbing to a fresh monthly high of 0.7222, and the pair may continue to appreciate over the coming days as it makes a more meaningful attempt to break out of the downward trend carried over from 2016.

Even though the Reserve Bank of New Zealand (RBNZ) is widely expected to preserve the record-low cash rate at the June 22 interest rate decision, the central bank proposed a debt-to-income instrument, which ‘would reduce the risk of a severe housing downturn in certain circumstances, and attenuate the impact of any downturn on the wider economy,’ and Governor Graeme Wheeler and Co. may show a greater willingness to gradually move away from its easing cycle as ‘the growth outlook remains positive, supported by on-going accommodative monetary policy, strong population growth, and high levels of household spending and construction activity.’ With that said, the RBNZ may merely try to buy more time with Governor Wheeler scheduled to depart in September, and a less-dovish policy statement may heighten the appeal of the New Zealand dollar as market participants scale back bets for additional monetary support.

NZD/USD Daily

NZD/USD Daily Chart

Chart – Created Using Trading View

NZD/USD may continue to retrace the decline from earlier this year as the pair makes a more meaningful attempt to break out the downward trending channel carried over from 2016; the Relative Strength Index (RSI) appears to be highlighting a similar dynamic as the oscillator threatens the bearish formation from last June and pushes into overbought territory for the first time this year.

With that said, a break/close above the Fibonacci overlap around 0.7200 (38.2% retracement) to 0.7240 (61.8% retracement) may open up the next topside hurdle around 0.7330 (38.2% retracement) to 0.7350 (23.6% expansion), which sits just below the 2017-high (0.7376).