NZD/USD continues pushing higher, now flirting with 0.6900 level but capped by 200DMA/annuals highs for now

• NZD/USD looks set to end the week firmly on the front foot and on course for a fourth successive session of gains.
• The pair is currently flirting with the 0.6900 level but remains capped by solid resistance (200DMA, annual high).
• A bullish breakout could open the door to a push towards 0.7000.

NZD/USD looks set to end the week firmly on the front foot and on course for a fourth successive session of gains. The pair has spent Friday’s session flirting with the 0.6900 level, but is for now being prevented from breaking higher by formidable resistance in the form of earlier monthly/annual highs in the 0.6925 area and the 200DMA at 0.6912. But NZD/USD still trades about 0.25% higher on the day and is up more than 2.5% versus earlier weekly lows in the 0.6730 area.

Earlier in the week, fears about lockdowns in China as the Omicron Covid-19 variant began spreading in various cities, challenging the country’s zero Covid policy, weighed on the NZD/USD and these fears appear to have ebbed somewhat, facilitating the rebound. Adding to that, the ongoing Russo-Ukraine war and subsequent harsh Western sanctions on Russian exports mean that other commodity-linked currencies like the kiwi remain in high demand. Meanwhile, the Fed’s hawkish policy announcement and subsequent hawkish commentary from two of the bank’s policymakers has failed to translate into US dollar upside, thus failing to prevent the recover over the last four session.

The kiwi also has the backing of a very hawkish central bank, with the RBNZ arguably the most hawkish G10 central bank right now (though the Fed is catching up). The suggestion is that NZD/USD can most certainly continue its recent rally. If it can muster a clean break above 0.6900 and above its 200DMA and earlier monthly highs, a rally back to 0.7000 is very much on the cards.