NZD/USD Dilemma: Lockdown Lift And Dampened Commodity Sentiment

Technical analysis of Forex market

NZD/USD does not seems to be benefiting from New Zealand’s planned lockdown lift and upbeat CPI data…

Yesterday (April 20), the New Zealand dollar outperformed other major currencies against the greenback, gaining 0.2% compared with the prior session. New Zealand Prime Minister Jacinda Ardern said the coronavirus alert level 4 lockdown in the country will end in a week, where key sectors will resume operations. Meanwhile, a day before, government data showed that New Zealand consumer inflation grew 2.5% on year in the first quarter, the strongest since 2011 and higher than 2.1% growth expected.

However, NZD/USD, widely considered as a commodity pairing, performance does not seem to be convincing so far this week, as the recent slump in oil prices has dampened sentiment in commodity-linked currencies.

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From a technical point of view, the longer term outlook for NZD/USD remains skewed to the downside as shown on the daily chart. The pair is trading with in a bearish rising wedge pattern, while the upside potential is also likely to be limited by a declining trend line drawn from December last year. Below the nearest resistance at 0.6260, and a downside break out from the wedge would suggest that potentially it is heading downward to the first and second support at 0.5840 and 0.5690 respectively. In an alternative scenario, a break above 0.6260 might open a path to the month-high in March at 0.6450 on the upside.