- NZD/USD falls to its lowest level since April 2020 and is under pressure from a combination of factors.
- Bets on more aggressive rate hikes from the Fed help the dollar to rebound quickly from a one-week low.
- Recession fears further benefit the safe-haven dollar and weigh on the risk-sensitive kiwi.
The pair NZD/USD adds to the previous day’s modest losses and remains under heavy selling pressure for the second day in a row on Tuesday. The bearish trajectory drags spot prices to the lowest level since April 2020 during the first half of the European session, with bears now expecting a sustained break below 0.5900.
The US dollar staged a strong rebound from a one-week low hit on Tuesday, which turns out to be a key factor putting downward pressure on the NZD/USD pair. The stronger US CPI report released last week only cemented expectations that the Federal Reserve will maintain its aggressive tightening policy. This continues to support elevated US Treasury yields and continues to act as a tailwind for the dollar.
In addition, a new wave of risk aversion is benefiting the dollar as a haven and helping to drive flows away from the risk-sensitive kiwi. Market sentiment remains fragile amid concerns that rapidly rising interest rates will trigger a deeper global economic downturn. In addition, headwinds stemming from China’s zero hole policy and the protracted war in Ukraine have fueled recession fears.
From a technical point of view, the pair has reached an important multi-month trend line at 0.5900 drawn by joining May and July 2022 lows. This warrants some caution on the part of bears as this key support may provide a recovery point for the bulls. A clear and decisive break below the trend line, confirmed by a daily close or open below, would consolidate the downtrend and signal further acceleration to the downside. That said, caution is warranted in the face of central bank risk this week. The Federal Reserve is scheduled to announce its policy decision at the end of a two-day meeting on Wednesday and this is likely to be a game changer for the dollar and the pair.
The US central bank is expected to raise interest rates again by 75 basis points. Therefore, the focus will be on the updated economic projections, the so-called dot plot and Fed Chairman Jerome Powell’s speech at the post-meeting press conference. Market participants will be looking for clues on the Fed’s policy outlook, which will play a key role in influencing USD price dynamics and help determine the near-term path of the NZD/USD pair.
Technical levels
NZD/USD
Panorama | |
---|---|
Last Price Today | 0.5906 |
Today’s Daily Change | -0.0053 |
Today’s Daily Change % | -0.89 |
Today’s Daily Opening | 0.5959 |
Trends | |
---|---|
20 Daily SMA | 0.6089 |
50 Daily SMA | 0.6193 |
100 Daily SMA | 0.627 |
200 Daily SMA | 0.652 |
levels | |
---|---|
Previous Daily High | 0.6003 |
Previous Daily Minimum | 0.5929 |
Previous Maximum Weekly | 0.6162 |
Previous Weekly Minimum | 0.594 |
Monthly Prior Maximum | 0.647 |
Previous Monthly Minimum | 0.6101 |
Daily Fibonacci 38.2% | 0.5957 |
Daily Fibonacci 61.8% | 0.5975 |
Daily Pivot Point S1 | 0.5924 |
Daily Pivot Point S2 | 0.589 |
Daily Pivot Point S3 | 0.585 |
Daily Pivot Point R1 | 0.5998 |
Daily Pivot Point R2 | 0.6038 |
Daily Pivot Point R3 | 0.6072 |
Source: Fx Street
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