Is NZD/USD Forming A Hammer Pattern?

The New Zealand dollar fell to its lowest levels against the US dollar in almost 4 years in early trading on Thursday. The Kiwi dollar sank after it was reported that the ANZ Business Confidence indicator fell in August to the weakest level since April of 2008. The survey found that 52.3% of respondents expect deteriorating business conditions in the coming year. The succinct headline of the release read; “Business confidence: Nothing good to say about it.”

RBNZ Policy

The news represents a setback for the Reserve Bank of New Zealand (RBNZ). The central bank stunned the market by cutting rates by 50 basis points to 1% in early August, with hopes of stimulating the economy and boosting business confidence. Speaking at a news conference after the policy meeting, RBNZ Governor Adrian Orr stated: “It is easily within the realms of possibility that we might have to use negative interest rates.”

US/China Trade War

The New Zealand dollar has been weighed on by the uncertainty caused by the US/China trade tensions and erratic tweets from President Trump. Amid the threat of global recession, ‘risk on’ assets such as the Kiwi dollar and stocks have been under pressure over recent weeks, while safe-havens such as gold and the Japanese Yen have been on the rise.

Technical Outlook

NZD/USD has been in a steady downtrend since July 19th and after probing a new multi-year low, the pair reversed to form a hammer pattern on the daily chart at the time of this writing. Potential support lies at the prior low of 0.6231 from September of 2015.

NZD/USD Daily Chart

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