NZD/USD bears move in on key daily support

• NZD/USD bears are in the market testing dynamic support.
• Risk-off tones due to higher oil prices are dominating ahead of RBNZ.

NZD/USD is lower on the day by some 0.3% after falling from a high of 0.6255 to a low of 0.6232 so far. Risk-off markets are kicking in on the back of the weekend news regarding the oil production cut and soaring oil prices. 

Saudi Arabia and other OPEC+ oil producers have announced further oil output cuts of around 1.16 million barrels per day. In a statement, the Saudi energy ministry said that the kingdom’s voluntary cut was a precautionary measure aimed at supporting the stability of the oil market. Consequently, WTI crude oil opened for the week with a significant price gap to print $81.51 during the early hours of Monday’s Asian session. 

Meanwhile, domestically, this week the focus shifts to the Reserve Bank of New Zealand. ´´While they’re likely to acknowledge risks around financial instability, NZ is remote from all that, and we think the inflation risks relating to the cyclone recovery in an already capacity-constrained economy are a bigger story,´´ analysts at ANZ Bank said, adding, ´´that could help the NZD this week.´´

Meanwhile, analysts at TD Securities noted that the February Monetary Policy Statement noted the Bank thinks further hikes are needed. ´´Aside from Gross Domestic Product, other data suggest the Bank will continue hiking. The Bank may acknowledge the turmoil in US and EU financials but conclude NZ banks are in good shape,´´ the analysts said. ´´To the extent, offshore lending standards tighten and our Fed terminal rate is now lower, this implies downside risk to our 5.50% terminal rate forecast,´´ the analysts concluded. 

NZD/USD technical analysis

The price is testing the dynamic support line on the daily chart and the M-formation is in play. If the bulls commit, a retest of the neckline and prior support might be expected to result in a downside continuation to break the dynamic trendline support.