FX.co ★ NZD/USD

The New Zealand Dollar (NZD) moves lower for the fourth consecutive day versus the US Dollar (USD) on Friday, with speculation about a big rate hike at the Federal Reserve (Fed )'s December 8-9 meeting pushing up the monetary divergence between the Fed and the Reserve Bank of New Zealand (RBNZ). NZD/USD is near its lowest level in 19 months, currently sitting at 0.5537 as of writing, and is likely to close in the red again after a third straight weekly decline. The chances of a 50-basis-point rate hike at the December FOMC have risen, causing US Treasury yields to rise sharply over the past few days, with the USD gaining on the back. Elias Haddad of Brown Brothers Harriman notes that while "this move may appear stretched in the near-term," the fundamentals remain supportive. "Strong growth momentum in the US, improving labor conditions and stubborn core inflation continue to tilt the scales higher," said Haddad. Unlike the USD, the NZD has struggled since mid-October after the RBNZ decided not to raise its Official Cash Rate (OCR) to 2.75%, while the market expected a 25-bp increase. The positive effect of the provisional results of the latest election on the New Zealand Dollar was only temporary. With upcoming RBNZ Inflation Expectations being watched closely on Tuesday, the main event for NZD remains the December monetary policy meeting. NZD/USD is trading at 0.5536 with a negative near-term bias, with the 19-month low at 0.5527 not far away. Meanwhile, the 4-hour Relative Strength Index (14) at 32.47 is hovering just above the oversold region, and the MACD is also below zero, implying bears still have some steam left despite NZD/USD approaching extended levels. For the time being, bears stay contained above the 127.2% Fibonacci retracement level for October's mid-October rally, with the price approaching the 0.5470-0.5485 zone – the lowest trading levels since the 2009 global financial crisis. On the upside, initial resistance can be spotted around the former support area at 0.5565 as well as the horizontal resistance at 0.5580. A move above those levels will further ease the downtrend and expose the 0.5660 level, where prices found resistance in late October to early November.