NZD/USD on Relief Rally After RBNZ Governor's Hawkish Tone

Summary:

NZD/USD is on a relief rally after RBNZ Governor's hawkish tone. The better-than-expected employment numbers have also fuelled the rebound.

NZD/USD is on a relief rally after RBNZ Governor maintained a hawkish tone. Notably, New Zealand is one of the few countries with near-zero community COVID-19 cases. The government’s swift response at the onset of the pandemic have helped the economy remain relatively steady.

As an indicator of economic growth, unemployment rate in the country fell by 4.7% in the first quarter. This is in comparison to the forecasted and prior reading of 4.9%. Wages also rose by 1.6% YoY with employment change improving by 0.6%.

In his statement, Governor Orr noted that while the economy’s recovery was better-than-expected, there is need to remain cautious. He noted,

“We will be watching how market conditions respond to the Government’s recent policy changes. If required, we are prepared to further tighten lending conditions for housing…”

NZDUSD Technical Outlook

NZD/USD is recouping some of Tuesday’s losses after the RBNZ Governor, Adrian Orr maintained a hawkish tone. After hitting an intraday low of 0.7116, the pair has bounced back to its current 0.7169. nonetheless, it remains below the descending trendline highlighted in purple. Besides, on a two-hour chart, it is trading along the 25-day EMA and below the 50-day EMA.

I hold the opinion that NZD/USD is on a relief rally and will continue on a downtrend in the near term. That thesis will hold for as long as the price remains below the descending trendline. It is likely to rise to 0.7181, where it will find resistance and decline to 0.7150. Below that level, the bears will be targeting 0.7115. On the flip side, a move above the resistance level will have the bulls eyeing 0.7212.