NZD/USD: Here’s why the Kiwi is loitering near its 3-year high

The NZD/USD price is hovering near its three-year high helped by the overall weak US dollar and the recovering New Zealand economy. The pair is trading at 0.7225, which is slightly below the year-to-date high of 0.7232.

New Zealand improving economy 

New Zealand managed to handle the coronavirus pandemic better than its peer countries. In total, the country recorded less than 3,000 cases and about 25 coronavirus-related deaths. 

As a result, the country managed to have a better recovery than its peer countries like Australia and Sweden. 

In a report published earlier today, the New Zealand statistics agency said the electronic card retail sales dropped by 0.4% in January, an improvement from the previous month’s decline of 0.6%.

This decline led to an annualised increase of 1.6%, lower than the previous month’s 3.5%. These numbers are usually important because they are seen as proxies for the overall retail sales in the country. 

Three weeks ago, the bureau published relatively strong consumer price index data, signaling that the Reserve Bank of New Zealand (RBNZ) will stop considering negative interest rates going forward. The Consumer Price Index (CPI) rose by 1.4% in December, higher than the estimated 1.1%.

There are hopes that the important service sector will start growing as more countries continue Covid vaccinations. This will help boost some of the most affected industries like hotels, restaurants, and tourism. 

The NZD/USD price has also gained because of the weak US dollar. The greenback has been on a downward trend in the past few months because of the policies by the Federal Reserve and politicians in Congress. 

The Fed has increased the supply of the currency through its quantitative easing program. It has also lowered interest rates while Congress has provided stimulus worth more trillions of dollars. 

NZD/USD technical outlook 

The NZD/USD price has been on a strong upward trend in the past few months. It has risen by more than 20% from its lowest level in 2020. 

On the daily chart, the price is above the 25-day and 15-day exponential moving averages (EMAs) while the Relative Strength Index (RSI) has continued to rise.

However, the momentum seems to be waning in the past few days. Still, the pair may likely continue rising but bulls will need to move above the year-to-date high of 0.7234. If you are not comfortable trading the NZD/USD with your real money, you can use a forex demo account instead.