NZD/USD forecast as New Zealand unveils new lockdown

The NZD/USD price crashed on Tuesday after the New Zealand government ordered a new lockdown following its first Covid case in months. The pair declined to 0.6900, which was the lowest level since July 28. 

New Zealand lockdown

The New Zealand dollar, commonly known as the kiwi, dived on Tuesday after the government announced a new lockdown. This happened after the country confirmed the first locally-transmitted Covid case in six months. 

The announcement was a major setback for Jacinda Arden’s administration that has been making plans to reopen the country. The government has also recently embarked on a plan to vaccinate most of the residents.

New Zealand and Australia use the same strategy to deal with Covid-19. They typically place lockdowns when a new case emerges. They usually use the lockdown to do contact tracing in a bid to slow the spread of the disease.

The announcement is notable because it came a day ahead of the latest Reserve Bank of New Zealand (RBNZ) interest rate decision. Before this outbreak, analysts were expecting the bank to raise interest rates by about 0.25%. Furthermore, recent data have been supportive of the economy.

For example, employment numbers showed that New Zealand has recouped most of the jobs it lost during the pandemic. Imports and exports have also risen while inflation has jumped above the RBNZ target of 2.0%.

Therefore, the NZD/USD will react to the statement by the RBNZ set for Wednesday. At the same time, the pair will react to the latest US retail sales numbers and a statement by Jerome Powell, the Federal Reserve chair. He is expected to provide hints about what the bank plans to do in the next few months. Some Fed officials like Mary Daly and Rober Kaplan have already hinted at tightening.

NZD/USD forecast

The NZD/USD pair declined sharply on Tuesday as New Zealand returned lockdowns. On the four-hour chart, the pair managed to move below the key support at 0.6920. This was a notable level since it was the lowest level since June 21st. The pair has also managed to move below the 25-period and 50-period exponential moving averages.

The Relative Strength Index (RSI) has also moved to the oversold level of 30. Therefore, while the pair may keep falling, there is a possibility it will have a relief rally as investors reflect on New Zealand lockdowns.