The NZD/USD pair climbs to near 0.5660 in Monday’s European session. It gains sharply after the Chinese government announced measures to boost private consumption. The Chinese central government said it would offer handouts to those struggling with the cost of living and vowed more benefits for some unemployed people, as reported by Xinhua News agency.
Focus on China’s Economic Data
Going forward, investors will focus on China’s National Bureau of Statistics (NBS) Manufacturing and Non-Manufacturing Purchasing Managers’ Index (PMI) data for December. This data is expected to show that the Manufacturing PMI expanded steadily to 50.3, while the non-manufacturing output grew slightly faster to 50.2. As New Zealand is a close trading partner of China, the New Zealand Dollar (NZD) is impacted by Chinese economic activity data.
RBNZ’s Interest Rate Expectation
However, the broader outlook for the Kiwi dollar remains weak. Investors are confident that the Reserve Bank of New Zealand (RBNZ) will cut its Official Cash Rate (OCR) again by 50 basis points (bps) to 3.75% in the February policy meeting.
US Dollar’s Movement
Meanwhile, the US Dollar (USD) drops on a broadly quiet trading day ahead of New Year celebrations. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls to near 107.85.
NZD/USD Technical Analysis
Support Level and Bearish Outlook
NZD/USD finds a temporary cushion near the two-year low of 0.5520 on a weekly timeframe. The outlook of the Kiwi pair remains bearish as the 20-week Exponential Moving Average (EMA), which trades around 0.5900. The 14-week Relative Strength Index (RSI) slides to near 30.00, suggesting a strong bearish momentum.
Breakout Scenarios
If it breaks below the psychological support of 0.5500, the Kiwi pair could decline to near the 13-year low of 0.5470 and the round-level support of 0.5400. On the other hand, a decisive break above the November 29 high of 0.5930 could drive the pair to the November 15 high of 0.5970 and the psychological resistance of 0.6000.
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