- NZD/USD is struggling to capitalize on its modest rally driven by upbeat New Zealand GDP data.
- The Fed’s hawkish outlook and rising US bond yields continue to support the USD and cap the pair’s gains.
- A softer risk tone also benefits the safe-haven USD and supports prospects for deeper losses in the pair.
The NZD/USD pair attracts new sellers after an intraday rise to 0.5950 and falls to a new daily low during the early part of the European session on Thursday. However, the pair manages to defend the round level of 0.5900, although the fundamental background supports the prospects of an extension of the pullback from a nearly three-week high, around the 0.5985 region touched on Wednesday.
The New Zealand Dollar (NZD) rose slightly today in reaction to better-than-expected national data, which showed the economy grew 0.9% in the June quarter. Additionally, first quarter data was revised upwards to 0.0%, compared to the 0.1% contraction that was originally reported. However, the NZD/USD pair is struggling to attract significant buying and the intraday rally fades fairly quickly on the back of some follow-on buying around the US Dollar (USD), reinforced by the Federal Reserve’s hawkish stance ( Fed).
As expected, the US central bank decided to keep interest rates at their highest level in 22 years, although it warned that inflation could lead to at least one more increase in interest rates in 2023. In addition, those responsible Politicians maintained their forecast for rates to peak between 5.5% and 5.75% later this year and for the benchmark rate to be at 5.1% next year, suggesting only two rate cuts in 2024, compared to the four previously planned. This remains support for rising US Treasury yields and lifts the dollar back closer to a six-month high.
Indeed, the rate-sensitive two-year US government bond yield rebounds to its highest level since July 2006, and the benchmark 10-year US Treasury yield hits a 16-year high. This rekindles concerns about headwinds from rapidly rising borrowing costs and weighs on investor sentiment. This is evidenced by a weaker tone around stock markets, which should benefit the safe-haven Dollar, and help shift flows away from the risk-sensitive NZD, validating the negative outlook for the NZD/USD pair.
That said, a modest intraday USD pullback helps the pair defend the 0.5900 level. Market participants now look to the US economic calendar, with the release of the usual weekly initial jobless claims, the Philadelphia Fed manufacturing index and existing home sales data later in the year. the American session. This, along with US bond yields and broader risk sentiment, could influence USD price dynamics and create short-term opportunities around the NZD/USD 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.
