NZD/USD surges to 5-week high, focus on this week’s RBNZ decision

Dismal NFP print for May continues to weigh on the greenback with the NZD/USD pair gaining further traction during European session, boosting the pair to a fresh 5-week high level of 0.6965.

The NZD/USD pair is benefitting from the risk-on trade fueled by a rebound in European equities and higher oil prices. 

On Monday and earlier on Tuesday, the pair was seen consolidating after Friday's strong up-move. Dips, however, were bought into near 5-day SMA and the pair resumed its up-move as the greenback came under renewed selling pressure.

The pair is also moving in tandem with strong up-move in commodity currencies as traders now look forward to RBNZ's monetary policy decision, later during the week. RBNZ is scheduled to announce its monetary policy decision on Thursday, where consensus is pointing to a 25bps rate cut that would bring down benchmark interest rates to 2.0% from current 2.25%. 

Expectations of a additional rate-cut had been the key factor for the pair's downfall in May. Hence, any surprise from this week's RBNZ monetary policy decision is likely to produce a knee-jerk reaction for the kiwi.

Technical levels to watch

From current levels, the pair seems more likely to extend its upward trajectory towards reclaiming 0.7000 handle. Momentum above this round figure mark resistance could get extended towards a strong resistance near 0.7050 area, earlier tested in April and May. A follow through buying action beyond this strong resistance would now pave way for extension of the pair's near-term upward trajectory.

Meanwhile on the downside, 0.6915-0.6900 area now seems to provide some immediate support for the pair. Failure to hold 0.6900 support and a subsequent drop below 5-day SMA support near 0.6885 seems to drag the pair immediately towards 50-day SMA near 0.6850 region. A convincing break back below 50-day SMA might negate any near-term bullish expectations and open room for further near-term depreciating move for the pair.