NZD/USD bulls moving in from an hourly key support

• The US dollar rallied to the highest point in two decades on Thursday.
• NZD/USD shows a firm case for the upside for the session ahead. 

NZD/USD has dropped to come close to meet the March 20 high of 0.6447, a long term key level. The low of the cycle was made today at 0.6451 after falling from a high of 0.6543. The US dollar rallied to the highest point in two decades on Thursday with the yen tumbling to its lowest since 2002 following after the Bank of Japan doubled down on its ultra-loose monetary policy. This transpired into a whitewash in commodities that sent the antipodeans lower. 

''The Kiwi initially fell further versus the dollar, amid broad USD strength overnight. This was compelled by the US GDP number,'' analysts at ANZ Bank said. ''While the economy shrank in Q1, private domestic demand remains strong. This crystallised hawkish expectations for the Federal Reserve. In fact, pricing for Fed hikes increased, which underlay the USD strength. Any reversal in this trend will likely need to wait until the FOMC meeting next week, at least.''

Meanwhile, the focus will also be on New Zealand employment next week and what it will mean for the Reserve Bank of New Zealand.  ''We’re picking that the Unemployment Rate fell slightly to 3.1%, versus 3.2% in the fourth quarter, Q4. But with Omicron peaking in the March quarter, uncertainty is high,'' analysts at ANZ Bank said.  

''Whatever the headline numbers, we expect the details of the release will confirm what we saw in the Q1 QSBO – that the labour market is becoming increasingly stretched, and will be a key source of domestic inflationary pressure of 2022''

For the RBNZ, the analyst say that the data should affirm that another 50bp OCR hike is needed in May to get in front of domestic inflation. ''The strong labour market is the keystone for our forecast of a soft landing for the economy. With housing markets softening across the country, ongoing low unemployment and rising wages will be key.''

NZD/USD technical analysis

The price formed a W-formation that drew in the bears until the neckline that is so far rating as support. So long as this holds, then there is a firm case for the upside for the session ahead.