March 23, 2023

NZD/USD Exchange Rate Drops: Challenges Ahead for the Kiwi Dollar

As the NZD/USD exchange rate drops, the New Zealand dollar faces challenges. Market sentiment, a decrease in investor risk tolerance, and the strength of the US dollar are contributing factors to the Kiwi’s decline.

In addition, the Federal Reserve’s upcoming interest rate decision is causing heightened market volatility and adding to the uncertainty. As a result, market analysts signal a rough road ahead for the Kiwi.

The NZD/USD and FED’s Decision on Rate Hikes

The NZD/USD currency pair hit a new low at 0.6440 in the first week of February, driven by a decrease in investor risk tolerance and an increase in the US dollar value. This decline in the Kiwi can be attributed to market sentiment, with investors opting for the safe-haven US dollar amid uncertainty.

In addition, the US Dollar Index (DXY), which measures the strength of the US dollar relative to a basket of other currencies, has also seen an increase, further contributing to the decline of the Kiwis.

The Federal Reserve’s upcoming interest rate decision has sparked heightened market volatility. This volatility is causing assets sensitive to risk, such as S&P500 futures, to lose previous gains made during the Asian trading period.

Investors are closely monitoring the decision, which has the potential to impact the market and add to the already existing uncertainty. With tensions running high, many investors are taking a wait-and-see approach as they navigate these tumultuous waters. It remains to be seen how the volatile market will react, but one thing is certain: the upcoming Fed decision is sure to be a major catalyst in determining the market’s direction.

Technical Analysis of NZD/USD

The Kiwi dollar’s downward spiral continues as the NZD/USD exchange rate drops below a key support level. The four-hour chart shows the currency pair breaking below the 0.6451-0.6515 range, resulting in a surge in volatility and trading volume.

Market analysts are interpreting the breakdown of the Rising Wedge pattern as a bearish reversal, signaling potentially rough waters for the currency. The New Zealand dollar has hit a rough patch, losing its grip at the 23.6% Fibonacci level of 0.6450.

In addition, the Relative Strength Index (RSI) has also dipped into a bearish range, indicating that the price of the Kiwi may be headed for a downward spiral soon. With the calculated low on January 6 at 0.6190 and the high on January 18 at 0.6531, analysts are certain the Kiwi will have to navigate some difficult roads before recovery.

The future of the NZD/USD exchange rate is up in the air, with two potential paths it could take. Supposing the exchange rate falls below the January 16 high of 0.6426. In that case, it may continue its downward trajectory and hit the January 17 low of 0.6366 and, with enough momentum, even reach the January 12 low of 0.6300.

On the other hand, if the Kiwi asset rises above the Wednesday high of 0.6530, it could experience an upward surge and reach the June 3 high of 0.6576. If the upward momentum persists, the Kiwi may break through the round-level resistance at 0.6600.

The more you look at the future of the rates, the more uncertain it looks, and it remains to be seen which path it will take.

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