NZD/USD: NEW ZEALAND GDP DATA FOR Q4 DID NOT MEET ANALYSTS' EXPECTATIONS

Current trend

This week, the NZD/USD pair had ambiguous dynamics: at first, it fell to the area of 0.6025, but has now resumed growth after the announcement of the results of the US Federal Reserve monetary policy meeting. The regulator kept the key rate at 5.50%, but the "dot plot" confirmed the forecast of a three-times reduction in interest rates this year, despite the increase in inflationary pressure in January-February. The head of the US Federal Reserve, Jerome Powell, said that the general trend towards slowing consumer price growth will continue, which strengthened investors' hopes for the beginning of monetary policy easing in June.

All this led to the sales of the US currency and the growth of the trading instrument, but it may not last long, since data on New Zealand's gross domestic product (GDP) in Q4 2023 were published today, turning out to be extremely weak: YoY, the economy shrank by 0.3% with preliminary estimates of 0.1%, and QoQ – by -0.1% instead of 0.1% growth. As the quarterly decline in GDP was the second in a row, the country's economy entered a recession, which may lead to a significant correction in monetary policy by the Reserve Bank of New Zealand (RBNZ). Earlier, officials hinted that they would not lower the interest rates until 2025, citing record immigration and the sustainability of core inflation. Now, experts believe that a serious economic downturn may change these plans, and the RBNZ will begin correcting monetary policy at the end of this year.

Such prospects may put significant pressure on the New Zealand currency and return the NZD/USD pair to a downward movement.

Support and resistance

Technically, the pair is close to the resistance zone of 0.6120–0.6140 (the central line of Bollinger Bands, 38.2% Fibonacci retracement), at the breakout of which growth will continue to the targets of 0.6225 (Murrey level [6/8], 23.6% Fibonacci retracement) and 0.6286 (Murrey level [7/8]). The key for the "bears" is the level of 0.6042 (Murrey level [3/8]), the breakdown of which will allow quotes to develop a decline to 0.5981 (Murrey level [2/8]), 0.5920 (Murrey level [1/8]), 0.5859 (Murrey level [0/8]).

Technical indicators confirm the likelihood of a resumption of decline: Bollinger Bands are reversing down, MACD is increasing in the negative zone, while Stochastic is reversing up, which does not exclude continued growth, but its potential is limited.

Resistance levels: 0.6140, 0.6225, 0.6286.

Support levels: 0.6042, 0.5981, 0.5920, 0.5859.

Trading tips

Short positions should be opened below the 0.6042 mark with targets of 0.5981, 0.5920, 0.5859 and stop-loss around 0.6085. Implementation period: 5–7 days.

Long positions can be opened above the level of 0.6140 with targets of 0.6225, 0.6286 and stop-loss around 0.6090.