- NZD / USD captures some buying on Friday amid modest USD weakness.
- Expectations from an optimistic Fed could prop up the USD and limit the pair’s gains.
- The focus remains on President Powell’s speech at the Jackson Hole Symposium.
The pair NZD / USD It has bounced around 20 pips from the daily lows and is trading, at the time of writing, close to daily highs around the 0.6950 region.
The pair has managed to find some support near the 0.6930 area on Friday and for now, it appears to have halted the previous day’s rejection drop from the 50-day SMA amid a modest decline in the US dollar. A positive tone around equity markets has been seen as a key factor that has weighed on the safe-haven USD and acted as a tailwind for the higher perceived risk NZD.
Nevertheless, Speculation that the Fed could still begin reversing its pandemic-era stimulus in 2021 should help limit the USD’s slide and limit the gains of the NZD / USD pair. Market expectations for an earlier move by the US central bank have been bolstered by comments the day before from two Fed officials, suggesting a faster pace of reduction in massive asset purchases.
Speaking to CNBC, St. Louis Fed Chairman James Bullard said it was skeptical that inflation would moderate and would want asset purchases to be completed by the first quarter of 2022. In addition to this, Dallas Fed Chairman Robert Kaplan said that the strength of the US economy still puts the Fed on track to begin reducing its monthly bond purchases in October or shortly thereafter.
Therefore, Market Focus Will Stay On Fed Chairman Jerome Powell’s Speech, at the Jackson Hole Symposium, to be held later during the American session. Investors will be looking for clues as to the likely timing for the Fed’s tightening plan. This will play a key role in influencing short-term USD price dynamics and provide further directional momentum to the NZD / USD pair.
Before the key event, investors could take cues from the release of the Fed’s preferred indicator of inflation, the core PCE price index. This, coupled with broader market risk sentiment, could provide some boost to the NZD / USD pair and allow investors to seize some short-term opportunities.
NZD / USD technical levels
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