Wellington morning – NZD/USD challenging channel resistance

Resistance – 0.7136, 0.7205, 0.7275

Support – 0.7054, 0.70, 0.6897

NZD/USD clocked a high of 0.7147 in overnight trade as traders in Europe and US were caught by surprise by RBNZ’s decision to keep rates unchanged.

Bank expressly cited concerns over rising house prices and emerging inflationary pressures. Even if we ignore these domestic issues, there was little reason for RBNZ to press the easing button, given the sharp rally in oil has calmed nerves across the globe. Central banks of other commodity/energy exporters are silent as well.

NZD card spending figures are due for release today. A slight slowdown is seen in card spending retail m/m figure. However, as long as the number is above zero level, NZD bulls would be happy, given the hawkish tone of RBNZ.

Technical outlook – Daily Chart

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  • Sharp rally in NZD/USD has left the pair overbought as per intraday RSI. However, there is no sign of bearish price-RSI divergence on hourly or 4-hour chart.
  • Plus, the daily RSI is yet to enter overbought territory.
  • Hence, the spot could test supply around 0.7205 (38.2% of 0.8836-0.6197).
  • For a more sustainable upside move, the pair needs to see a bullish break from channel on day end closing basis.
  • On the lower side, a corrective rally to 0.7054 (Apr 19 high) cannot be ruled out given the overbought RSI on intraday timeframes. This appears likely if spot sees a failure to sustain above channel resistance in London morning.
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