NZD/USD Price Forecast: Resistance at 0.5805 is likely to hold bulls

Technical Analysis: Bulls need to break 0.5805 and 0.5850 resistances

The technical picture shows the pair in a positive trend from mid-October lows at 0.5680, though the reversal from 0.5795 on the 4-hour chart suggests significant resistance in a former support area.

Looking from a wider perspective, the pair should break resistance at the mentioned 0.5800 area (October 9 high) and the October 6 high, at 0.5850 to break the bearish structure of lower highs and lower lows from mid-September highs, and aim for the area of 0.5915 (September 11 low).

To the downside, immediate support is at Tuesday’s low of 0.5760, and the trendline support from October 14 lows, now at 0-5750. A confirmation below here would increase pressure towards the October 17 and 21 lows, at the 0.5710 area.

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.