- The New Zealand Dollar maintains its upward trajectory amidst optimistic market sentiment.
- The Kiwi experiences an increase in tandem with worldwide equities as Oil maintains its downward trajectory and US PMIs display a combination of outcomes.
- The NZD/USD pair concludes the week positively, as it experiences an increase in value, nearing the 200-day Simple Moving Average (SMA) level of 0.6100.
The New Zealand Dollar (NZD) reached its highest point of the day against the US Dollar (USD) at 0.6087 towards the end of the Friday session. The NZD/USD pair maintained a 1.6% weekly increase on Friday due to the ongoing positive sentiment in the market and the transition of power to a new government in Wellington, which marks the end of several weeks of coalition negotiations.
The boost in market sentiment is attributed to the decline in Oil prices as OPEC+ nations engage in discussions regarding the allocation of anticipated supply reductions. In the United States, as per inventory data, there is an increase in oil stocks, contributing to the continued price decline. This is welcomed news for individuals and companies dealing with financial constraints and increasing expenses. The weekly PMI data released globally was generally positive, improving overall sentiment.
As a commodity currency, the Kiwi is highly susceptible to changes in investor sentiment and perceptions of global growth.
The Strong Market Sentiment fuels the New Zealand Dollar
- The New Zealand Dollar experiences an increase as it benefits from a favorable risk appetite due to the decrease in Oil prices and encouraging macroeconomic data.
- Negative developments concerning Zhongzhi, a Chinese asset manager, which has become another casualty of the property bubble in China, have not generated substantial apprehensions regarding the general health of the Chinese economy. According to a report by Reuters, it has been announced that the company is insolvent, with liabilities ranging from $58 to $64 billion. However, it is anticipated that government intervention will be implemented to mitigate the risk of contagion.
- According to Reuters, Christopher Beddor, deputy director of China research at Gavekal Dragonomics, stated that financial regulators are likely to take decisive action if there are indications that Zhongzhi’s difficulties are spreading.
- Initial Purchasing Manager’s Index (PMI) readings for November in the Eurozone and UK exhibited performances that surpassed expectations. In the United States, the PMIs displayed a combination of results. The Services index outperformed expectations, recording a value of 50.8 compared to the projected 50.4. However, the Manufacturing sector fell short, registering a reading of 49.4 instead of the anticipated 49.8.
- A government was formed in New Zealand as the New Zealand National Party, a center-right political party, joined forces with its coalition partners, the New Zealand First Party, known for its populist stance, and ACT New Zealand, a libertarian party. This coalition marked the end of the Labour Party’s nearly six-year rule.
The New Zealand Dollar to US Dollar Pair Breaks but Does Not Remain Above Crucial Resistance
The NZD/USD pair, representing the exchange rate between New Zealand and the US Dollar, approaches very closely to the 200-day Simple Moving Average (SMA) on Friday afternoon.
The duo is experiencing a brief and moderate-term bullish pattern, which persists in favoring long positions.
The 200-day Simple Moving Average, located at 0.6100 (slightly higher than the current market level of 0.6084), is expected to be a significant resistance level for any potential upward movement. Consequently, the price will probably likely experience a pause upon reaching this level.
The MACD momentum indicator increases with the price, indicating robustness in the upward trend.
A potential bullish inverse head-and-shoulders (H&S) pattern might have emerged at the lows. The labels given in the above chart help identify the pattern. L and R represent the left and right shoulders, while H signifies the head. The objective for the inverse H&S is located at 0.6215. This contributes further support to the optimistic viewpoint.
The overall trajectory continues to indicate a bearish pattern, implying the possibility of a recurrence.