- After falling sharply during the US session on Thursday and Apac on Friday, the NZD/USD has stabilized in the 0.6725 area.
- Next week’s Fed meeting and New Zealand CPI data will be the key events to watch.
- NZD/USD will be watching for a test of the 0.6700 level.
After falling sharply late Thursday/early Friday morning below an uptrend that has supported price action since mid-December, the NZD / USD it has stabilized at the 0.6725 area. The pair broke below the uptrend during the US session on Thursday as stocks fell on Wall Street, which at the time broadly affected risk assets such as the New Zealand dollar. Although US (and global) stocks continued to fall on Friday, a sharp drop in US bond yields (related to safe-haven demand) has tempered the US dollar’s safe-haven appeal, shielding NZD/USD from losses. additional.
Next Week Matters for NZD/USD Traders
During the US session on Wednesday, the Fed will release its latest policy decision, where it is expected to green light multiple rate hikes in 2022 from March and may give more details on quantitative tightening. Shortly after and at the start of the Asian session on Thursday, fourth quarter consumer price inflation data will be released in New Zealand. A better-than-expected result could result in a strengthening of the market’s conviction that the RBNZ is ready to continue the cycle of rate hikes that began last year and stay well ahead of the Fed with regard to removing the monetary relaxation.
While that might be enough to give the NZD a temporary boost, the currency, as usual, will trade primarily based on USD inflows and risk appetite. It’s been a rocky start to the US fourth-quarter earnings season: Netflix, the first major US tech company to report, is down more than 20% the day after Thursday’s earnings release. , and this may continue to weigh on the NZD. Widespread fears about the Fed’s aggressive line, as well as a possible escalation of geopolitical tensions in Eastern Europe, could also continue to weigh on risk appetite and the kiwi. NZD/USD, which is down a little over 1.0% on the week from above 0.6700, looks very likely and may even break below 0.6700 in the week ahead.