Current trend

During the Asian session, NZD/USD quotes are showing flat trading, holding near 0.5900. The instrument is prone to developing upward dynamics in the ultra-short term, rapidly retreating from its annual lows updated at the beginning of the week against the backdrop of the weakness of the American currency due to the fall in bond yields. At the same time, the upward momentum for the dollar, caused by the reduction in expectations of the US Federal Reserve’s easing of monetary policy, is gradually leveling out.

Markets are looking ahead to the regulator's December meeting, forecasting a –25-basis-point interest rate adjustment, but the decision could be influenced by macroeconomic statistics released the day before: for example, Building Permits issued in October fell by 0.600 million after an increase of 1.425 million in the previous month, while analysts expected 1.430 million, and Housing Starts fell from 1.353 million to 1.311 million, with preliminary estimates of 1.330 million.

The Reserve Bank of New Zealand will meet on December 27, where officials are likely to cut interest rates by 50 basis points. S&P Global Ratings noted that the adjustment in borrowing costs and changing monetary policy approaches could further impact the performance of financial institutions in the context of global economic uncertainty. In New Zealand, rising house prices continue to put pressure on credit users, increasing the risk of defaults for banks. In the housing sector, such lending is expected to slow as households adjust to higher interest rates. Nevertheless, S&P analysts forecast a recovery in the country's economy: Gross Domestic Product (GDP) will rise from –0.2% in fiscal year 2024 to 1.7% in fiscal year 2025 and 2.5% in fiscal year 2026, and inflation will reach the regulator's target range of 1.0–3.0% by fiscal year 2025, where it is expected to remain for at least the next two years.

On Monday, the market received mixed macroeconomic data: New Zealand's third-quarter Producer Price Index Input rose from 1.4% to 1.9% with expectations at 1.0%, while the Producer Price Index Output also accelerated from 1.1% to 1.5%, while analysts had expected 0.9%.

Support and resistance

On the daily chart Bollinger Bands are trying to reverse horizontally. The price range is almost unchanged, but it remains rather spacious for the current level of activity in the market. MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). Stochastic maintains a confident upward direction and is currently rapidly approaching its highs, indicating the risks of overbought New Zealand currency in the ultra-short term.

Resistance levels: 0.5920, 0.5950, 0.5975, 0.6000.

Support levels: 0.5885, 0.5858, 0.5830, 0.5800.

Trading tips

Long positions can be opened after a breakout of 0.5920 with the target of 0.5975. Stop-loss — 0.5885. Implementation time: 2-3 days.

A rebound from 0.5920 as from resistance, followed by a breakdown of 0.5885 may become a signal for opening of new short positions with the target at 0.5830. Stop-loss — 0.5920.