- NZD/USD rallied towards 0.6275 but erased 50 pip gains as sentiment softened.
- Fears of a US recession hang over investors as the housing market continues to cool.
- NZD/USD Price Analysis: The pair is facing solid resistance despite breaking out of a falling wedge to the upside.
On Wednesday, the NZD/USD hit a fresh 3-week high at 0.6272 but is pulling back as market sentiment soured after news that Google would go the way of Apple and may suspend hiring for two weeks.
NZD/USD opened near session lows around 0.6220, but advanced steadily through the Asian and European sessions towards weekly highs before stumbling down to daily lows. At the time of writing, the NZD/USD is trading at 0.6224, up just 0.05%.
US housing market shows signs of slowing
Recession fears could reignite due to worse-than-expected housing data. Earlier, US existing home sales fell to two-year lows and contracted 5.4%. Although it is the fifth consecutive decline, the increase in interest rates may not stop the decline in the short term. Also on Tuesday, housing starts and building permits acted as leading indicators for existing sales, contracting 2% and 0.6%, respectively.
Meanwhile, the New Zealand economic docket reported the Dairy Traders Price Index at -5% vs. -4.1% a month ago, which was mostly ignored by NZD/USD traders.
Therefore, the NZD/USD outlook looks more bullish for the USD, despite US housing data showing contraction, which could be a bullish scenario for the greenback. Why? Because the US dollar, throughout recessions, has risen. Also, commodity prices tend to decline during such periods due to falling demand, which is a headwind for the New Zealand dollar.
What must be considered
In New Zealand, the trade balance for June will be published, as well as imports and exports. In the United States, the Philadelphia Fed manufacturing index, initial jobless claims and the Central Bank’s leading index.
NZD/USD Price Analysis: Technical Outlook
From a technical point of view, the NZD/USD has a bearish bias, despite breaking out of a falling wedge, along with trading above the 20-day EMA. However, NZD/USD price action is forming a tombstone doji preceded by an uptrend, which means sellers stepped in, capping prices, so NZD/USD could consolidate in the short term .
NZD/USD resistance levels would be the July 20 high at 0.6272, followed by 0.6300, and then the 50-day EMA at 0.6314. On the other hand, the first support for the NZD/USD would be 0.6200. If it breaks below, the 20-day EMA at 0.6195 will be exposed, followed by 0.6100.
Source: Fx Street
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