NZD/USD Price Analysis: Extends rally above 0.6200 amid cheerful market mood
- NZD/USD jumps higher above 0.6200 amid the higher risk appetite of investors.
- The US Dollar is under pressure despite favorable FOMC minutes.
- NZD/USD rallies after a Double Bottom formation.
The NZD/USD pair has climbed above the round-level resistance of 0.6200 in Thursday’s European session. The Kiwi asset has extended its winning spell to the seventh trading session as the US Dollar is facing stiff pressure amid an improvement in the appeal of risk-sensitive assets.
This week, the People’s Bank of China (PBoC) cut the five-year loan prime rate (LPR) by 25 basis points (bps) to boost domestic growth and counter real estate challenges. The New Zealand economy is one of China’s leading trading partners. The Kiwi strengthens being a proxy to China’s economic outlook.
The US Dollar failed to find a firm cushion despite the Federal Open Market Committee (FOMC) minutes for the January policy meeting reflecting policymakers’ priority to maintain higher interest rates. Federal Reserve (Fed) policymakers are not interested in reducing interest rates until incoming data convince them that inflation will return sustainably to the 2% target.
Going forward, investors will focus on the United States preliminary S&P Global PMI data for February, which will be published at 14:45 GMT and New Zealand’s Q4 Retail Sales data on Friday.
NZD/USD delivers a strong rally after a Double Bottom formation near 0.6050 on a four-hour timeframe. A Double bottom formation indicates a value-buying spot, which establishes a bullish reversal. The asset is approaching the horizontal resistance plotted from January 4 high at 0.6286.
The 20-period Exponential Moving Average (EMA) around 0.6172 continues to provide support to the New Zealand Dollar bulls.
Additionally, the 14-period Relative Strength Index (RSI) shifts into the bullish range of 60.00-80.00, indicating that an active bullish momentum.
Considering a sharp rally in the pair, the risk-reward for fresh buying is not favorable. Therefore, a gradual correction to the 20-EMA near 0.6172 could be an ideal buying situation for investors. After a dip buying, market participants should hold position for the targets of round-level resistance at 0.6200 and January 11 high at 0.6260.
In an alternate scenario, a downside move below February 20 low near 0.6129 would expose the asset to the round-level support of 0.6100, followed by February 13 low near 0.6050.