NZD/USD buyers are eyeing a firm break above the 200-week moving average for the first time since April 2018
The pair is currently sitting just under 0.6900 as the kiwi jumped following the RBNZ policy decision earlier, where they unveiled a new lending program that resulted in negative rates expectations for next year fizzling.
Of note, price has moved to its highest levels since March 2019 as buyers look poised to try and retest the highs last year closer to 0.6940-42.
Adding to that move, is a potential break above the 200-week MA (blue line) for the first time since April 2018. If buyers can keep up the momentum for the rest of the week, the bias switches to being more bullish for the first time in two-and-a-half years.
Further resistance is now seen at the highs last year near 0.6940-42 before the December 2018 high comes into play at 0.6970.
As much as the gains here look impressive, context matters. The market may be riding the vaccine optimism still, thinking that if the RBNZ isn't pursuing negative rates now then there might not be a need to do so as the global outlook improves next year.
That sort of reflects the more forward-looking and upbeat sentiment where we are seeing an internal rotation itself within the stock market. However, is this trend sustainable?
There is still plenty of uncertainty to deal with in the coming months and if the global outlook doesn't improve all too much going into Q1 2021, the market may realise that it will still take time before things get better and more easing policy may be needed.
That is one risk factor to consider when looking at the kiwi gains today.
Putting that aside for the moment, the technical picture continues to allude to a more bullish push towards 0.7000 at least for NZD/USD. But the RBNZ is known to be more vocal about the strength in the kiwi, as seen here, so that is something to also be mindful of when trying to size up the upside potential in the currency.
That said, jawboning can only do so much and unless equities are headed for a significant correction towards the year-end, then the kiwi's path of least resistance may be for a move higher as long as buyers keep with the technical break above; though gains are likely to be more measured moving forward.
