- NZD/USD turns positive for the week, up 0.34%.
- Market sentiment weighs on USD and boosts NZD.
- Fed officials support 0.50% hikes in June and July, but remain uncertain about September.
- NZD/USD – A break above 0.6568 will open the door for further gains.
The NZD/USD soars in the American session, snapping a two-day losing streak, and is testing four-week highs around 0.6560 amid a session of upbeat market sentiment, as reflected by gaining US stocks. NZD/USD is trading at 0.6555, close to daily highs, after reaching daily lows of 0.6460 earlier in the European session.
On Thursday, sentiment improved and stocks rallied. The narrative of the financial markets remains the same. Concern about the tightening of monetary policy by the US Federal Reserve threatens to cause a recession in the country. JP Morgan CEO Jamie Dimon warned investors to prepare for an economic “hurricane” as the economy faces an unprecedented mix of challenges, according to Bloomberg.
In addition to the above, the conflict between Ukraine and Russia, which has lasted three months, has begun to weigh on food prices. Similarly, the latest outbreak of coronavirus in China, which triggered lockdowns for a month in Shanghai, and which now appears under control, could reappear on the scene.
Given this scenario, the greenback remains on the defensive, as shown by the US dollar index, which fell 0.77%, reversing Wednesday’s gains, and stood at 101,760. NZD/USD, which fell for two consecutive days before recouping those losses, is set to end the week on a higher note.
Meanwhile, Fed officials continue to make statements. Cleveland Fed President Loretta Mester favors a 50 basis point hike at upcoming meetings, adding that the Fed is well positioned to consider the right pace for further rate hikes.
Mester added that she is not sure how far rates need to go, and that a pause in the tightening cycle would depend on the data. However, she stressed that the Fed would put the brakes on if inflation remains stubbornly high, and that it continues to hold rate hikes to 25 or 50 basis points, as opposed to a pause in September.
Earlier on Thursday, Fed Vice Chair Lael Brainard said the central bank is getting mixed signals about the economy and the number one challenge is to bring down inflation. When asked about a Fed pause, she said it’s harder to say because policy is not on a set course, via CNBC.
A missing New Zealand economic docket would leave NZD/USD traders leaning on US economic data.
Meanwhile, on the US calendar, May Non-Farm Payrolls, ISM Non-Manufacturing, and Composite PMIs would be released, along with other Fed speakers, before the blackout of the Open Market Committee meeting. June Federal Reserve.
NZD/USD Price Forecast: Technical Outlook
NZD/USD is moving higher and is testing May’s 5-change high at 0.6568. Furthermore, the Relative Strength Index (RSI) is pointing higher in bullish territory, with enough room before reaching overbought conditions. Therefore, the NZD rally would continue, and a break above 0.6568 could pave the way for further gains. The next supply zone would be the 50 DMA at 0.6607. Once breached, the 100 DMA would be exposed at 0.6674, followed by the 200 DMA at 0.6815.
Source: Fx Street
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