NZDUSD Pops on NZ Government’s Fiscal Stimulus But Technicals Still Suggest A Sell


NZDUSD traded higher to 0.6095 after the New Zealand government announced that it would launch a massive stimulus program. The currency pair was initially trading around 0.6040 ahead of the news.

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After the RBNZ conducted an emergency rate cut over the weekend, it was the government’s turn to roll out liquidity measures for the economy. In a statement, it was announced that the country will have 12.1 billion NZD package to help support businesses in the healthcare and aviation industries. Workers will also get help through wage subsidy and support during self-isolation amid the coronavirus pandemic. This amount is equivalent to 4% of the country’s GDP and overshadows the stimulus program the country had during the 2008 financial crisis.

However, NZDUSD was unable to hold on to its gains because the finance ministry warned that New Zealand will fall into a recession.

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NZDUSD Outlook

On the 4-hour time frame, we can see that NZDUSD was able to pare some of its losses back to the 38.2% Fib level (when you draw from the high of March 11 to the low of March 16). The uptick has allowed the currency pair to test resistance at the falling trend line from connecting the highs of March 9, March 11, March 12, and March 16.

A closer look at the recent price action of NZDUSD also shows that it has been consolidating with an upward slope. Consequently, a bearish flag chart pattern has formed. This is considered as a bearish continuation pattern in forex trading. A break below yesterday’s low at 0.5983 could mean that there is more downside ahead for NZDUSD. If sellers continue to dominate trading, the next floor for the currency pair could be at 0.4960 where it bottomed on March 2009.

On the other hand, a close above yesterday’s high at 0.6129 could mean that there are buyers in the market. We could soon see NZDUSD retest its previous lows at 0.6240.More content