New Zealand Dollar Holds Ground Near Eight-Week Highs Amid Weak US Dollar

The New Zealand Dollar (NZD) has maintained its recent rally against the US Dollar (USD), despite some loss of momentum on Friday. The Kiwi currency remains near eight-week highs at 0.5885, boosted by a weak USD after the Federal Reserve's monetary policy meeting on Wednesday. The Fed left its Federal Funds Rate unchanged at 3.50%-3.75%, but the lack of guidance shown by Chairman Warsh was seen as dovish, sending the USD tumbling against its main peers.

The NZD has rallied nearly 1.5% this week, and while it's currently trading near the previous resistance area at 0.5860, downside attempts have been contained so far. However, technical analysis suggests that the pair is ripe for a deeper correction, with overbought Relative Strength Index (RSI) levels hinting at a potential reversal.

Looking ahead, a sharper reversal below the mid-July highs in the 0.5860 level could find support between the ascending trendline from June 25 lows and the July 23, 27, and 29 lows. On the topside, above Thursday's highs at 0.5885, bulls might face resistance at the 78.6% Fibonacci retracement of the June sell-off.