FxNews—New Zealand’s main stock index, the S&P/NZX 50, climbed over 1% to close at 13,196. This is the highest it has been since October 2021. Investors feel optimistic as they await Wednesday’s Reserve Bank of New Zealand’s interest rate announcement.
However, the surge in the NZ’s stock market did not reflect on the NZD/USD currency pair, where the downtrend persists. Many expect the central bank to lower the official cash rate by 0.5%, bringing it down to 4.25%. This move would mirror the rate cut that took place in October.
NZ Major Stocks Rise Despite Trade Deficit Shrink
Most sectors in the stock market saw gains ranging from 1% to 2%. Major companies like Fisher & Paykel (up 1.7%), Meridian Energy (up 2.4%), Auckland International Airport (up 3.7%), Infratil (up 1.3%), and Mercury NZ (up 2.4%) experienced notable increases.
Retail sales in New Zealand dipped by 0.1% in the third quarter, following a larger decline of 1.2% in the previous quarter. The country also reported a trade deficit of NZ$1.5 billion in October, an improvement over the NZ$1.7 billion deficit from the same month last year. A trade deficit means the country imports more goods than it exports.
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NZDUSD Remains Bearish Despite Gains in NZ Stocks
The New Zealand dollar began its bearish trajectory after testing the 50-period simple moving average as resistance. As of this writing, the NZD/USD currency pair trades at approximately $0.583, stabilizing below the August 5 low.
The immediate resistance is at $0.591. From a technical perspective, the NZD/USD market outlook remains bearish as long as prices are below $0.591. In this scenario, the next bearish target will likely be $0.577.
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The Bullish Scenario
Please note that the selling strategy should be invalidated if the NZD/USD price exceeds $0.591 or the 100-SMA. If this scenario unfolds, a new bullish wave could emerge, targeting $0.597.