NZD/USD stalls at 0.6400 after strong advance on USD weakness

• NZD/USD moves towards a test of 0.6400 and has eyes on 0.6450.
• 0.6450 is a confluence between the August high and the 61.8% retracement of the entire 2022 move.

The NZD/USD it is stuck below 0.6400 as the US dollar tries to correct what has been a significant move lower in currency markets this week. At the time of writing, NZD/USD is down more than 1% and has fallen from a high of 105,896 to a low of 104,664 so far.

The dollar’s move has been fueled by dovish comments from Federal Reserve Chairman Jerome Powell, or at least the comments the market prefers to hear. On Wednesday, Powell gave a speech in which he indicated that the Fed would soften the historically high pace of interest rate hikes at its next policy meeting in December.

“The time to ease the pace of rate hikes could come as soon as the December meeting,” Powell said in remarks at the Brookings Institution. As a result, the dollar fell, US yields fell and stocks rose. The S&P 500 ended its three-day losing streak Y closed up 2.7% as the Dow officially entered a bull market.

However, Powell’s admission that “the way forward for inflation remains highly uncertain” and when he said that “by any standard, inflation is still too high”, and “much more evidence will be needed to give certainty that inflation is really coming down,” probably means the Fed will keep raising interest rates well into 2023. Also, earlier in the week, St. Louis Federal Reserve Chairman James Bullard warned that the stock market is underpricing the risk of a continuously aggressive Fed. On Thursday, John Williams of the New York Fed, who recently said he predicts a time, “probably 2024,” when the Fed will lower the fed funds rate, said on Fox News that the Fed has a way forward. move in terms of rate hikes.

However, the market is taking dovish comments from a speech that had a thing for the hawks and doves and that has seen the Kiwi rally strongly over the past 24 hours through resistance at 0.6325 (76.4% of the level). Fibonacci of the August-October sell-off) as the following technical analysis will show:

NZD/USD Technical Analysis

The above series of weekly, daily and H4 charts illustrate the prospects for a move towards 0.6450. Analysts at ANZ Bank state that the “price action looks extremely strong and technically the next major target level is 0.6450 (which marks both the August high and the 61.8% retracement of the entire 2022 move).”