NZD/USD rose about 0.48% on Thursday after finding support near the 200-day SMA at 0.5836. Over the past two sessions, the pair moved through 0.5900, following a hawkish hold by the RBNZ.
Technically, price action has broken out of a prior rotation area and pushed above the 100-day SMA at 0.5893, shifting focus upwards. RSI has turned firmer after moving past the 50 neutral line a day earlier. A break of 0.5950 would put 0.6000 in view, ahead of the 26 February swing high at 0.6014; beyond that, attention turns to the yearly high at 0.6094. If the pair slips back below the 100-day SMA, the next levels are the 50-day SMA at 0.5856 and then the 200-day SMA at 0.5836, with 0.5800 beneath.
Fundamental Tailwinds and Bullish Positioning
The NZD/USD has decisively moved out of its recent trading range, and we believe the bullish momentum is just beginning. The Reserve Bank of New Zealand’s firm stance against inflation last week provides a strong fundamental tailwind. We are considering buying call options with near-term expiries to capitalize on this upward move.
This view is supported by recent data showing whole milk powder prices rose 3.4% in the latest Global Dairy Trade auction. Furthermore, Stats NZ reported this week that unemployment held steady at a low 4.1%, giving the RBNZ more room to keep rates high. This contrasts with softer-than-expected US retail sales figures released on Tuesday, which are weighing on the US Dollar.
Risk Management and Strategic Levels
We are looking at the 0.5950 psychological level as the next immediate hurdle for the pair. Buying call options with a 0.5950 strike price and a June or July 2026 expiry appears to be a viable strategy. Should this level be breached, the path toward the 0.6000 mark opens up, which would be our initial target for taking profits.
On the other hand, we must manage our risk if the upward break fails. A drop back below the 100-day Simple Moving Average at 0.5893 would signal a loss of momentum. To hedge our long positions, we could purchase put options with a strike near the 50-day SMA around 0.5850 as a form of insurance.
This setup is reminiscent of the market action in early 2024, when a similar policy divergence between the RBNZ and the Federal Reserve led to a multi-week rally in the Kiwi. History suggests that when the RBNZ’s hawkishness stands out, the NZD/USD can sustain gains for an extended period. We see the current environment as a potential repeat of that pattern, driven by fundamental policy differences.
