The New Zealand Dollar (NZD) extended downside movement against the greenback yesterday, dragging the NZD/USD to less than 0.8480 amid US growth optimism and Reserve Bank of New Zealand (RBNZ) monetary policy outlook. The sentiment also turns to bearish due to Lower Low (LL) on the daily chart. The pair is however approaching a key support area where huge buying interest may be noted.
As of this writing, the pair is being traded near 0.8486. A hurdle can be noted around 0.8504, the 38.2% fib level ahead of 0.8571, the intraday high of yesterday as demonstrated in the following chart. A break above 0.8571 will expose 0.8778 in the long run which is the swing high of the last major rally.
On the downside, the pair is likely to find a support near 0.8419, the 50% fib level. A bullish reversal from the 0.8419 support area appears to be the most likely scenario, however if the RBNZ announces a cut in the benchmark interest rate then the pair might go for a deeper correction below the 0.8400 handle.
New Zealand Building Permits
Statistics New Zealand will release the Building Permits report on Friday (tomorrow). According to the average forecast of various analysts, the building permits declined by 5% in April as compared to 8.3% increase in the month before, better than expected actual outcome will be seen as bullish for NZD/USD and vice versa. Generally speaking, higher building permits are seen as positive for the economy as they signal boom in the housing sector.
Keeping in view the overall fundamental and technical outlook, buying the pair near the 50% fib support area appears to be a good strategy, the trade should however be stopped out on a daily closing below the support level as described above.
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