• NZD/USD has rallied to a key resistance zone with little signs of waning below 0.6100.
  • Risks are tilted to the downside in the wake of trade wars and possible risks of new COVID-19 cases. 

NZD/USD has been on the grind to the upside as the US dollar lost its footing, giving way below the 100 handle in the DXY. The bird has been able to capitalise on this and breached he mid-April resistance, poking its head above the 0.61 figure. At the time of writing, NZD/USD is trading at 0.6132 having climbed from a low of 0.6107 to reach a high of 0.6176. 

“Aussie and Kiwi were the market darlings of April, but Kiwi is the darling at the minute as the big dollar languishes,” analysts at ANZ Bank explained. 

We did see an attempt to break through key resistance at 0.6170 overnight and that’s going to be a magnet today too, all else equal. For now, there’s no reason to stand in the way of the rally, but regular readers will be aware that we’re more cautious medium term. If markets are on a risk-on mood (oil has snapped back) then Kiwi will be better supported.

All eyes on trade war risks and COVID-19 contagion prospects 

That being said, the COVID-19 situation is fluid and there is plenty to be cautious over as some nations and numbers of state in the US seek to kick start their economies by easing social distancing meares and get businesses back to work. Western Europe’s experience in relaxing restrictions, and the most successful approaches there, will inform the approaches deployed in the United States.

However, what the bird does have going for it is its own domestic circumstances, pertaining to COVID-19 and opening up of the economy, is far better looking (safer) than that of the US. This can give it an edge in the market, although if we see a resurgence in COVID-19 cases around the world as nations try to normalise, then, we are certainly going to see more volatility which is USD favourable. 

By the same token, should trade wars be a thing again in coming weeks, as per yesterday’s US Pres Trump: US trade deal with China has been “upset very badly” by the coronavirus, again, the bird will suffer in such a climate and the US dollar will thrive. 

NZD/USD levels