NZD / USD recovers from lows, still negative below 0.7000 level

• The NZD / USD extends this week’s heavy losses and has seen selling for the fourth day in a row.
• The strong positive movement of the USD after the FOMC is seen as a key factor behind the current decline.
• Technical selling below the 200-day SMA and the 0.7000 level further contributed to the decline.

The pair NZD / USD maintains its sales pitch during the European session on Friday, falling to the 0.6960 region to the lowest level since early April. At time of writing, the pair is recovering slightly towards 0.6990, still negative on the day.

The pair has extended its recent bearish move and continued to lose ground for the fourth day in a row on Friday. This also marks the fifth day of negative movement in the previous six and it is due to the strong bullish sentiment prevailing around the US dollar.

In fact, the DXY dollar index has hit highs of more than two months and has remained supported by the sudden optimistic turn of the Fed. It is worth remembering that the Fed surprised investors on Wednesday and advanced its projections for the first interest rate hikes after the pandemic.

The so-called point graph targets two rate hikes by the end of 2023 versus March’s projection of not increasing until 2024. This, to a greater extent, has helped offset the sharp drop in US Treasury yields the previous day and, for the most part, disappointing US macro data.

Aside from this, Friday’s drop could be further attributed to some technical selling below the very important 200-day SMA. A subsequent break below the key psychological level of 0.7000 could have already set the stage for an extension of the current bearish move.

That said, the extremely oversold conditions on intraday charts warrant some caution for bears. Therefore, it will be prudent to wait for some short-term consolidation or a modest bounce before positioning for a further decline amid the absence of relevant economic releases on Friday.

NZD / USD technical levels