Current trend

The NZD/USD pair is declining as part of a newly forming downward trend, holding around 0.6000. The likelihood of an interest rate adjustment by the Reserve Bank of New Zealand (RBNZ) and the slowdown in the Chinese economy continue to put pressure on the instrument's quotes.

The decline in consumer prices in New Zealand in the second quarter significantly adjusted preliminary estimates regarding a possible adjustment in borrowing costs: thus, the value dropped from 0.6% to 0.4% month-on-month instead of the expected 0.5% and from 4.0% to 3.3% year-on-year compared to expectations of 3.5%, reaching the lowest level in three years. In July, regulator officials noted that their subsequent decisions would be based solely on macroeconomic indicators. In turn, Electronic Card Retail Sales, which is a key indicator of consumer spending, fell by 0.6% in June from –1.2%, demonstrating negative dynamics for the fifth month in a row, which, in turn, contributed to the correction of the annual value to –4.9% and confirmed the continuing pressure in the national economy.

In turn, a member of the US Federal Reserve Board of Governors, Christopher Waller, suggested that a reduction in the interest rate will occur in the near future if no negative changes are recorded in the rates of inflation and employment. The official's comments are of particular interest to market participants as he has previously advocated a purely "hawkish" approach, and pointed to the likelihood that price increases will be more sustainable than expected. Economists forecast the Core Personal Consumption Expenditures - Price Index to be released on Friday at 14:30 (GMT 2), will rise 0.1% in June for the second month in a row, adjusting three months of annual core inflation below target indicator of 2.0%.

Support and resistance

The NZD/USD pair is declining as part of a newly forming downward trend. Last week it broke below the level of 0.6042 (Murrey level [3/8]) and is now close to the level of 0.5981 (Murrey level [2/8]), consolidation below which will allow the decline to continue to the targets of 0.5920 (Murrey level [1/8] ) and 0.5859 (Murrey level [0/8]). The key level for the "bulls" seems to be 0.6075 (Fibonacci retracement 50.0%), supported by the center line of Bollinger Bands, a breakout of which could lead to a change in the current trend and renewed growth to the levels of 0.6140 (Fibonacci retracement 38.2%) and 0.6225 (Murrey level [6/8], Fibonacci retracement 23.6%).

Technical indicators generally allow for the possibility of further price declines: Bollinger Bands are directed downwards, MACD is increasing in the negative zone, and Stochastic is entering the oversold zone, which does not exclude an upward correction, but its potential seems limited.

Resistance levels: 0.6075, 0.6140, 0.6225.

Support levels: 0.5981, 0.5920, 0.5859.

Trading tips

Short positions may be opened below 0.5981 with targets at 0.5920, 0.5859 and stop-loss at 0.6025. Implementation period: 5-7 days.

Long positions may be opened above 0.6075 with targets at 0.6140, 0.6225 and stop-loss at 0.6035.