Technical Indicators Support Upward Momentum

The US Dollar Index has dipped slightly to around 99.00, mainly due to renewed worries about its safe-haven status. The NZD/USD pair is aiming for a rise towards 0.6100, supported by a positive chart pattern and technical indicators. The Bullish Flag pattern and a rising 20-day Exponential Moving Average are driving upward momentum. If the price breaks above the daily high, the pair could advance towards the September 11 low of 0.6100 and the October 9 high of 0.6145. If the price goes down, support is at the May 12 low of 0.5846 and again at the April 10 high of 0.5767. The next interest rate decision from the Reserve Bank of New Zealand (RBNZ) is set for May 28, 2025, with a consensus rate expected to be 3.25%.

Market Positioning and Near-term Outlook

With NZD/USD reaching heights not seen in over six months, focus is now on what comes next after the policy decision. The RBNZ is widely expected to lower its key interest rate from 3.50% to 3.25%, a move already reflected in current market prices. If the cut happens as predicted, any immediate gain in the pair may rely more on guidance and tone rather than the actual change. Markets often react to shifts in future expectations more than the events themselves. The Kiwi’s rise isn’t isolated. It is strengthening against most major currencies, especially with pressure on the Yen, likely as investors move away from lower-yield assets. Coupled with a weaker US Dollar, due to a temporary easing of tariff tensions, the New Zealand currency has found itself in a favorable position recently. From a technical standpoint, momentum plays a significant role. The Bullish Flag seen on daily charts signals a continuation after an initial rise. Prices staying above the 20-day Exponential Moving Average support this upward trend. If prices break through previous resistance levels—specifically the September 11 low and the October 9 peak—a move towards 0.6150 may occur smoothly. However, caution is necessary. If market sentiment shifts, nearby support is available. The May 12 low of 0.5846 and the April 10 high of 0.5767 are levels where buying interest could return. These are more than just numbers; they are crucial points where traders have held significant positions in the past, making them potential buffers if the Kiwi stumbles near its current highs. In our view of short-dated options or spread strategies, implied volatility has not yet captured the potential for a post-decision price adjustment. Staying adaptable is wise. Well-structured long Gamma or delta-neutral positions might provide flexibility if price fluctuations widen after the meeting. Markets will closely analyze Orr’s comments. Persistent uncertainty about inflation or external demand might lead policymakers to keep future rate cuts as an option. If that occurs, it establishes two targets: one for rates and another for traders tracking price movements around key technical levels. Keep positions close to these areas and adjust exposure as clarity emerges. Given the prevailing sentiment and price direction, a retest of 0.5970–0.5985 might be seen by some as a buying opportunity. However, this assumption hinges on staying above 0.5900; dropping below that could disrupt the current trend and prompt a reassessment across the board. In FX futures, positioning still favors a net-long NZD. However, week-on-week changes show caution as traders trim positions. This kind of adjustment can set the stage for a new upward movement—especially if the policy shift leads to lower short-term yield differentials elsewhere. We should also consider that the next RBNZ meeting isn’t until late May. This places greater importance on interim data like inflation reports, employment updates, and global risk events. Traders may quickly adopt a data-dependent stance, and any surprises could reset chart projections. Volatility may increase during low liquidity hours, especially since cross-asset flows are affecting FX markets more than before. It’s advisable to monitor equity and bond markets before establishing new positions. In the short term, the directional bias seems to lean upward, but the potential for sharp price movements remains high. Scale your exposure accordingly. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now