The New Zealand dollar came under pressures this week after Fitch Ratings cut the $128B economy’s long-term credit rating outlook to ‘negative’ and the high-yielding currency may continue to face increased selling pressures over the near-term as the ratings agency sees a risk for the isle-nation to fall into a low-growth trap.
Currency Pair: NZD/USD
Chart: 60 Min Charts
Short-Term Bias: Bearish
Analysis
The New Zealand dollar came under pressures this week after Fitch Ratings cut the $128B economy’s long-term credit rating outlook to ‘negative’ and the high-yielding currency may continue to face increased selling pressures over the near-term as the ratings agency sees a risk for the isle-nation to fall into a low-growth trap. After reaching a high of 0.7220 in August, the NZD/USD tumbled to a low of 0.4894 in March as market participants curbed their appetite for risk however, the recent improvement in market sentiment paired with hopes for a marked economic recovery in New Zealand may continue to push the exchange rate higher over the near-term as traders move into higher risk/reward investments. However, as the economic activity remains weak, the Reserve Bank of New Zealand may take additional steps to stem the downside risks for growth and inflation, and speculation for further easing could weigh on the kiwi-dollar going forward. Over the next few hours of trading, we may see the pair continue to push lower following the rise in risk aversion and fill-in the gap from the 120-SMA (0.6370). However, as the RBNZ attempts to put a floor on the cash rate, investors anticipate the central bank to tighten policy over the next 12-months, and long-term expectations for higher interest rates may continue to support the New Zealand dollar ahead of the rate decision later this month. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
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