Currency pair of the week: NZD/USD

NZD/USD has broken above recent highs and targets near 0.7900!


The Reserve Bank of New Zealand (RBNZ) will meet on Wednesday this week to discuss monetary policy at their latest interest rate decision meeting.   Although the central bank hasn’t met since November 11th, 2020, they are expected to leave rates unchanged at a record low of 0.25%.  In addition, they are expected to maintain their Large-Scale Asset Purchase Program at NZ$100 billion. The statement and the press conference to follow should be interesting.  The RBNZ’s has signaled that their inflation target is 1-3%.  In Q4 2020, the inflation reading was 1.4% (QoQ).  In addition, most economic data, including employment and manufacturing, has improved since November.  The central make may have to revise their economic forecasts given the strong data as of late.  On the coronavirus front, after lasts weeks impromptu 3-day lockdown in Auckland due to a family contracting the UK variant, no other people were determined to have contracted the virus.  With a population of 5 million, there have been less than 2,400 cases and only 26 deaths.  Vaccinations have begun, and New Zealand expects to vaccinate everyone within a year. 

US Fed Chairman Jerome Powell will be in the spotlight on Tuesday as he testifies before Congress in his semi-annual Monetary Policy Report on Tuesday.  The rhetoric from Fed members over the past 2 weeks has been that the Fed will continue to keep rates low for an extended period and that monetary policy will be keep accommodative for some time.  There have been signs of inflation in the economic data for January and yields have reached post-pandemic highs, however Fed members have continued to say that this inflation is unsustainable and transitory.  Powell has also said  that the Federal government must do more, including the approval of the $1.9 trillion stimulus package proposed by Joe Biden.  Economic data has been strong, ex-jobs, which Powell may address.  Coronavirus cases and hospitalizations have been dropping throughout the US and vaccinations have begun.  However, there is still concern as to whether the coronavirus variants will raise these numbers in the spring.

On a daily timeframe, NZD/USD has been moving higher from its pandemic lows on March 19th at 0.5469 and is currently putting in highs not seen since April 2018.  The pair traded sideways for most of the summer of 2020, before moving higher again in an orderly upward sloping channel in the fall of 2020.  The new year started with NZD/US making a new  2 ½ year high on January 6th at 0.7315 before consolidating in a symmetrical triangle until February 9th, forming a pennant.  The pair then broke above the top, downward sloping trending of the pennant.  On Friday, price moved aggressively higher and today (Monday), NZD/USD took out the January 6th highs, putting in a current high of 0.7338. However, notice that the RSI is diverging with price, an indication that the pair may be ready for a pullback.  The target for a pennant formation is the length of the flagpole added to the breakout point, which is near 0.7900.

Source: Tradingview, City Index

On a 240-minute timeframe, the chart shows a closer view of the symmetrical triangle of the pennant, in addition to the breakout to new highs.  Resistance is at the 127% Fibonacci extension from the January 6th highs to the January 18th lows anear 0.7376.  Horizontal resistance from February 2018 provides the next resistance at 0.7430 and then the 1.618% Fibonacci extension from the previously mentioned timeframe at 0.7453.  First support is at February 16th highs near 0.7268, before the pennant trendline , which now crosses bear the February 17th lows of 0.7158.

Source: Tradingview, City Index

NZD/USD has broken out above recent highs and targets near 0.7900!  However, close attention must be paid to the RBNZ interest rate meeting and US Fed Chairman Powell’s testimony to Congress this week.  If the RBNZ turns less dovish and the Fed remains more dovish, the pair could move higher quickly.  However, this will also depend of the direction of the variants of the coronavirus and the vaccine rollout.

Learn more about forex trading opportunities.


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit for the complete Risk Disclosure Statement.