The New Zealand dollar continues to rally this week. Currently, NZD/USD is trading at 0.7286, up 0.48% on the day. The pair has gained 1.4% this week and has touched a high of 0.7315 today, its highest level since April 2018.
More pain for the US dollar in 2021?
The US dollar has bid goodbye to a miserable year of 2020, but the currency could well find itself in retreat in early 2o21. The incoming Biden administration has pledged to implement further stimulus, and the Democrats are on the verge of controlling all three branches of the federal government if they can hang on to their narrow leads in the Georgia runoff election. This would allow the Democrats a free hand at pursuing policies such as raising corporate taxes and undoing pro-business legislation enacted under President Trump. These moves would likely be bearish for the US dollar, especially if more stimulus is on the way which will flood the economy with dollars. An increase in negative real yields in the US will exacerbate the woes of the greenback, and we can expect the rotation into pro-cyclical currencies like the New Zealand dollar, which has soared against the US dollar, to continue.
With Covid expected to diminish this year or even disappear completely due to the rollout of Covid vaccines, New Zealand’s export-reliant economy should bounce back in 2021. Just a few months ago, the New Zealand central bank was toying with adopting negative interest rates due to the severe economic downturn, but with the global economy slowly finding its footing, it’s a safe bet that these plans have been shelved for the foreseeable future. This removes a significant downside risk for the New Zealand dollar. Despite Covid-19, the New Zealand dollar has made impressive gains against the US dollar, and the short-term future for the currency is looking as bright as a beautiful New Zealand sunrise.
NZD/USD Technical
- NZD/USD tested resistance at 0.7285 in the Asian session. Close by, there is support at 0.7319, followed by .07377
- There is support at 0.7193. Below, we find support at 0.7135
- The pair crossed above the 10-day MA line last week. This is a bullish development for the pair, which continues to move to higher levels
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