The New Zealand Dollar has capitulated and presently wallows close to two-year lows as risk aversion has hit the market this Friday. The NZD/USD is trading 1.05% lows, extending the losses for the week into the fifth straight day.
An aggressive dot plot by the Federal Reserve, additional geopolitical concerns from Eastern Europe and fears about the growth of the global economy are fuelling a push to safety. This is benefitting the greenback against a host of risk-associated currencies such as the Aussie Dollar and the Kiwi Dollar.
The last time the NZD/USD hit these lows was during the worst of the pandemic in 2020. The latest plunge was set off by Russian President Vladimir Putin’s call-up of 300,000 reservists to join the war in Ukraine. This major escalation has seen panicked Russians attempting to leave the country via the two open land borders to Europe.
The FOMC raised interest rates by 75 bps and released a dot-plot showing more aggressive action in coming meetings. These have served to add to the greenback’s strength this week. The NZD/USD is down 3.56% this week in what could be its second heaviest weekly fall of 2022.
The breakdown of the 0.0.59237 support (16 April 2020 and 18 May 2020 lows) cleared the route to the 0.58453 support (3 April 2020 low). The active daily candle has violated this pivot and needs to maintain the current price level or lower to confirm the breakdown of this pivot. If this happens, it creates additional harvest points for the bears at the 0.56978 support (18/24 March 2020 low) and the 0.55860 (23 March 2020 low).
On the flip side, recovery on the pair needs a closing penetration above the 0.59237 resistance. This will give the bulls clear skies to aim for the 0.60989 resistance (29 August low). If the bulls achieve clearance of this level, the 0.61548 barrier (9 September 2022 high) becomes the next logical target. 0.62220 (12 May and 5 August lows) and 0.62768 (25 July 2022 and August 2022 highs) become additional harvest points for the bulls if the advance continues.
This post was last modified on Sep 23, 2022, 14:47 BST 14:47