NZDUSD has seen a rally of over 550 pips in the last three weeks. With this, the currency pair is now trading around its February highs. The weekly time frame shows that the currency pair is about to test resistance at the falling trendline from connecting the highs of January 2018, April 2018, and December 2019. Near-term resistance is around 0.6545 where the falling trendline coincides with the 100 SMA. If there are enough buyers in the market, we may even see it go all the way up to its December 29 highs.
What has pushed NZDUSD to rally so strongly?
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Part of the reason for its massive bullish run is dollar weakness. Protests which broke out in the US in support of the Black Lives Matter movement has weighed on the USD. This especially became a concern for investors when US President Donald Trump threatened to impose Martial Law. This was after the threatened to deploy active US military personnel to US cities.
Another, less headline-grabbing reason is the fact that New Zealand has been doing well in combating the coronavirus. The country has recorded 14-straight days of no new cases of the disease. With this, it will soon be able to claim that it is Covid-19-free while other countries continue to see their number of cases rise. Along with this progress, investors may feel confident that the New Zealand economy will soon be on track to recovery.
But as I always say, nothing is set in stone in the markets. While the outlook for New Zealand is positive, buyers may still run out of momentum. Should this happen, we could soon see NZDUSD fall to the 0.6200 handle. This price offers a confluence of support with the rising trendline from connecting the lows of March 19 and May 18. It also aligns well with the 50% Fib level when you draw the Fibonacci retracement tool from the low of May 15 to today’s highs.
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