Strategy
Buy 0.6810 with a stop below 0.6610 for profit target at 0.7210. Duration of this trade could be 6 months.
Technical View
The price decline to the low of 0.6528 on 23 January, which was just above the Fibonacci 50% correction point of the rally from the low at 0.5466 to the high of 0.7216, could be a sign that the decline was just a price correction and the decline could have ended at 0.6528. Price has also moved above the 20EMA and if price were to close above the high at 0.6888, it is likely to move higher to the previous high at 0.7216. The strong green candle in the previous week is also a sign of a possible price low having formed.
Stochastic had a bullish crossover and had started to move higher, hinting at a price rally ahead. 20EMA has turned neutral after being in a bearish price trend. However, MACD remains bearish.
Fundamental View
The Reserve Bank of New Zealand hiked rate for the third straight meeting, hiking interest rate to 1% in February 2022. The central bank also forecasts its cash rate climbing to 2.5% over the next 12 months and peaking at about 3.25% at the end of 2023. This is an increase over the forecast given in November, where the central bank had forecast a peak of about 2.5%. The reason given was to contain inflation. In the past few weeks, with crude oil prices and with mineral ores and grains prices shooting up as a result Russian invasion of Ukraine, the Reserve Bank of New Zealand is likely to increase its peak forecast again.
While the U.S. is also likely to increase its interest rate next week, it is likely to lag behind its New Zealand’s counterpart. Interest rate differential is now in the kiwi favour and is likely to remain into the next year. This is likely to keep the kiwi stronger against the U.S. dollar.
Despite the ongoing Russian-Ukraine war, with the safe haven U.S. in demand, the kiwi had held its ground against the U.S. dollar. While the war may rage on longer than expected, the kiwi is also likely to hold its ground against the U.S dollar.