- NZD/USD is gaining ground for the fourth day in a row, though the upside remains limited.
- Expectations of a new Fed rate hike of 0.25% in July continue to support the USD and limit the pair’s gains.
- Worsening US-China relations act as a headwind for the NZD ahead of the release of the FOMC minutes.
He NZD/USD is moving with a slight positive bias for the fourth day in a row on Wednesday, though it is struggling to capitalize on the move and remains capped near the 0.6200 level during the European session. However, the pair remains close to a one-week high hit on Tuesday and the technically significant 200-day SMA.
Rising expectations for a 25 basis point Fed rate hike At its next monetary policy meeting on July 25-26, it continues to support high US Treasury yields, which act as a tailwind for the US dollar (USD) and limit the NZD’s rise. /USD. However, the USD rally lacks bullish conviction amid uncertainty about the Fed’s future rate hike path. The US central bank had signaled in June that borrowing costs may still have to rise as much as 50 basis points by the end of this year. That said, the lower US Personal Consumption Expenditure (PCE) Price Index released on Friday, coupled with weakness in the US ISM Manufacturing PMI on Monday, raises questions about the room for maneuver in the US. that the Fed has to continue tightening its monetary policy.
Therefore, the market’s attention will continue to be focused on the publication of the minutes of the June FOMC meeting, which will be announced later during the American session. Investors will be looking for fresh clues on the Fed’s near-term outlook, which will influence dollar price dynamics and provide further directional momentum to the NZD/USD pair. Meanwhile, Concerns over a global economic downturn should continue to benefit the safe-haven USD. Furthermore, the worsening relationship between the US and China could further constrain the risk-sensitive NZD.
In fact, China imposed restrictions on two metals widely used in semiconductors, electric vehicles and high-tech industries. The measure, which takes effect on August 1, could cause further global supply disruption. China’s Ministry of Commerce claimed the move was aimed at safeguarding national security, though analysts consider it a response to US efforts to slow down China’s technological advance. However, the announcement could escalate the trade war between the world’s two largest economies and weigh on the NZD.
Apart of this, the explicit signal from the Reserve Bank of New Zealand (RBNZ) that it had ended its most aggressive cycle of hikes since 1999 warrants some caution before entering aggressively bullish positions around the NZD/USD pair. Therefore, acceptance above the 0.6200 level and a subsequent move above the 200-day SMA are necessary to support the prospects for any further upside in the pair.
NZD/USD technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
