NZD/USD consolidates around the 0.6400 level, about to break a seven-week losing streak

• After failing to break above its 21 DMA at 0.6413, the NZD/USD has pulled back to consolidate around 0.6400.
• The pair is heading for its first positive week in seven as traders prepare for next week’s RBNZ rally.

Although risk assets appear to end the week in a stronger position, most of them have pulled back from session highs since the opening of US trade, and the kiwi is no exception. The NZD/USD It managed to break above the 0.6400 level earlier in the day, but ran into resistance at its 21-day moving average at 0.6413 and has since pulled back to trade near 0.6400. This leaves the pair with gains of around 0.3% on the day and around 1.75% on the week. This would mark the first positive week for NZD/USD in seven.

The main driver of gains this week has been a broad weakening in the US dollar, which seems to have positioned itself on more than fundamentals as US economic data was mixed (retail sales for April were strong, but Philadelphia Fed manufacturing survey was weak) and Fed comments were aggressive. However, the kiwi has also drawn some support from the domestic themes.

Rising quarterly producer price inflation rates, according to data released on Thursday, have reinforced expectations that the RBNZ will raise interest rates by 50 basis points next Wednesday. Elsewhere, first quarter retail sales data released on Tuesday should point to a robust New Zealand economy. This combination could keep the kiwi supported next week, but overall risk appetite will also remain key.

Global stock markets have been choppy this week, on the one hand on concerns about the Fed tightening and weakening global growth, but also on constructive updates from China (more monetary/fiscal stimulus and hopes of an easing of the monetary politics). If stocks continue to slide next week, this could offer the dollar a safe haven, while it could also benefit from aggressive words in the Fed’s Minutes due on Wednesday.

Technical levels