The New Zealand Dollar (NZD) is grappling with headwinds against the US Dollar (USD) amidst escalating geopolitical tensions in the Middle East. At present, the NZD/USD pair is trading around 0.5880, reflecting pressure stemming from a risk-averse environment. Investors are flocking to safe-haven assets like the USD due to heightened uncertainty, particularly driven by the intensifying tensions between Israel and Iran. The backdrop of this situation is further accentuated by the US Dollar Index (DXY) nearing its highest level since November 2023, currently hovering above 106.20. This index, which measures the USD's value against a basket of major currencies, strengthens as the USD gains favor. The recent impetus for potential Israeli action came from a US intelligence briefing to the Biden administration, wherein Israel outlined its plans to strike within the next two days, with Iranian nuclear facilities being excluded from the targets.
Despite a recent three-day decline that saw the NZD/USD pair hitting a five-month low of 0.5858, there are indications from technical indicators of a possible bullish correction. The Relative Strength Index (RSI) is on an upward trajectory near 30, while the Stochastic oscillator shows a bullish crossover, signaling that the pair might be oversold and primed for a rebound.
In terms of resistance levels, the immediate hurdle for the NZD/USD lies at 0.5940, followed by the 20-day Simple Moving Average (SMA) at 0.5980. Further upward movement could encounter challenges from the 200-day SMA at 0.6050 and the 50-day SMA at 0.6065, positioned near the medium-term downtrend line.Conversely, a break below the five-month low of 0.5858 could trigger a deeper decline towards the next support level at 0.5770, last witnessed in October 2023. Zooming out, the broader trend for the NZD/USD since late December has been downward, with the pair currently hovering precariously just above the critical 0.5770 level. While technical indicators suggest the potential for a short-term rebound, the overall sentiment and the persistent downtrend are likely to continue weighing on the NZD in the foreseeable future. The evolving geopolitical situation and its impact on risk appetite will be crucial factors influencing the direction of the NZD/USD pair in the days ahead.
