NZD/USD continues on its northerly flight plan, targeting 50% retracement of the 2018 downtrend

• NZD/USD continues higher in a steady fashion, making a high of 0.6840
• It was another bulletproof night for the NZD as it avoided the volatility seen elsewhere.

NZD/USD has been resilient in the past number of sessions, sidestepping each an every negative headline as they have been flooding in, be it Brexit, another poor data release impacting the outlook for global growth, or disappointing performances in global equities. Yet, despite all of what would usually hamper the bird's northerly flight plan, there has been let up its run from 0.6708 to 0.6840 and beyond the 38.2% retracement fibo (0.6810) of the 2018 sell-off from 0.7441 highs to 0.6427 2018 lows.

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Analysts at ANZ Bank New Zealand Limited argued that the market positioning is still a dominant narrative. "Technically, it has broken through the first level of topside resistance, but there seems to be plenty of other key levels up here that will make the path higher tricky."

My, that bird can fly

One has to question why there is so much interest in the low yielding bird? The currency had very little going for it prior to this sudden change in trajectory, right up until October. However, there have been some signs of sustainable growth in the country following a series of upbeat data surprises, that included GDP, CPI and more recent, jobs raising the prospects for the RBNZ to lean more on the hawkish side after a long period of time in neutral. RBNZ rate cuts have likely been priced out and the curve has been steepening. 

"We have long held a bearish bias towards the NZD/USD. However, given the shifting risks around the domestic rates outlook, it is now unlikely that our earlier 0.62 end‑2018 forecast will be achieved and we have altered our forecasts accordingly," the analysts at ANZ explained, however, adding, "That said, we are happy to retain a medium-term bearish bias. Risk appetites are in the box seat at present and we can’t rule out further improvement. But a number of factors warrant caution, not least the softer global growth picture, tightening liquidity, and the fragile political landscape."

NZD/USD levels

• Support 0.6700 
• Resistance 0.6850

NZD has remained elevated since the strong employment report which had sent the bird onto the 0.68 handle and through the 38.2% retracement fibo (0.6810) of the 2018 sell-off from 0.7441 highs to 0.6427 2018 lows. There could be a case for a move back towards 0.68 again on profit-taking, (overbought conditions in daily RSI), before a further run towards a 161.8% extension level at 0.6870 which guards 0.6929, as the 50% fibo of the 2018 range - (weekly RSI has room to go).