NZD/USD has traded in a range in the past week. Resistance at 0.7042 has held the pair lower on two attempts while drops below the 0.7000 handle have been brief and met with buyers.
The currency pair fell lower from a rising channel that had contained price action for a week. The break lower materialized after yesterday’s North American close, but losses were not sustained.
A reversal shortly after the downside break triggered a recovery to take NZD/USD back into positive territory. The first test of the broken rising channel resulted in a correction but a late day push back above the lower line has invalidated the pattern and the bearish sentiment associated with it.
The US dollar index (DXY) bounced from support at 99.43 yesterday and extended higher in a recovery today. The support level marks a spike low from December and had held the index higher at the end of January and early February. The psychological 100.00 handle has proven to be a barrier as DXY has consolidated below the level for most of the North American session.
A major catalyst for the euro and the dollar will be the French election which takes place on Sunday. Although the Kiwi dollar will be less impacted by the election, NZD/USD is at risk in the event there is a sharp repricing of EUR/USD at next week’s open.
CPI data out New Zealand this past week came in ahead of the central bank’s modest expectations and beat the analyst consensus. However, gains in the exchange rate were not sustained as a turn in the European session wiped out most of the early day rally that came as a result of the report.
The economic calendar does not contain any major releases from New Zealand next week. Data that stands to carry a high impact on the exchange rate from the US includes consumer confidence, durable goods orders and the advance reading of quarterly GDP.
Among the Kiwi cross rates this week, NZD/JPY will close the week out in the green to snap a prior 11-week losing streak. NZD/CAD moved sharply higher after posting a bullish hammer last week. The pair is on track to close at the highest level on a weekly chart since early February.
The range in NZD/USD will continue to be important next week as a range break could trigger a sustained trend. Resistance is seen between 0.7042 and 0.7058, support falls between 0.6973 and 0.6991.