The rates continues within an upward trend. At the end of May, the trend increased due to the easing of quarantine measures to contain the pandemic, so nvestors began to actively buy risky assets. So the US dollar, being a safe haven currency during the pandemic, was under pressure. The New Zealand dollar, as a key risk asset, was also supported by a recovery in the manufacturing activity in China and an increase in the demand for raw materials.
The NZD's strengthening was certainly possible under the influence of external factors, but with the beginning of summer, optimism on the market only increases despite the deterioration of relations between China and the United States. This week was marked by a true rally for the NZD/USD, during which the New Zealand dollar has increased in value five days in a row.
At the same time, there are risks for the NZD that are associated with a decrease in its appeal to investors, especially if the RBNZ reduces the rate into negative territory at the next meeting. The USD also has good prospects for strengthening, especially if situation on the employment market stabilizes, and the riots that have engulfed the country come to an end. This may happen as early as mid-June, but so far, unemployment is growing and according to the forecasts, it should grow by the end of May to 19.7%, while in the EU, unemployment is 7.3%.
The New Zealand dollar is already testing the pre-quarantine level of the rates, and it is likely to reach it in the near future. The NZD rally may not last long, but it is likely to continue next week, after the publication of data on the trade balance in China, which is expected to be better than in the US. We believe that the deals to BUY are still relevant in the short term, after which we expect a strong price correction. Most technical analysis tools also indicate the effectiveness of the deals on the trend, despite the rates being in the overbought zone.
