- NZD/USD continues to move higher on Friday and rises to a two-month high
- Uncertainty over the next Fed rate hike keeps USD bulls on the defensive.
- The risk-positive tone also appears to cap the USD and benefits the risk-sensitive NZD.
The pair NZD/USD extends this week’s strong bullish move and gains traction for the fifth day in a row on Friday. The momentum drives the torque to Break above two-month highs, around the 0.6465-0.6470 areaat the start of the European session.
the pair looks supported by US dollar weakness, which fails to take advantage of the previous day’s rebound from its lowest level since the end of June and remains in a range on the last day of the week. The uncertainty about the size of the next rate hike by the US central bank seems to act as a headwind for the dollar.
On Wednesday, the US CPI reported that consumer prices were unchanged in July. In addition, the producer price index US PPI unexpectedly fell in July for the first time in two years, suggesting that inflation may have peaked. This lowered expectations of future rate hikes.
However, the recent hawkish comments from several Fed officials indicated that the Fed would actually maintain its tightening policy. In fact, San Francisco Fed President Mary Daly, St. Louis Fed President James Bullard, Chicago Fed President Charles Evans, and Minneapolis Fed President Neel Kashkari, have backed the idea of ​​further increases in interest rates.
The markets continue to value at least a 50 basis point Fed interest rate hike at the September meeting. This continues to support elevated US Treasury yields and offers some dollar support. However, signs of easing inflationary pressures have forced investors to cut expectations for a 75-point Fed rate hike at the September policy meeting.
The last upward movement of the pair has managed to find acceptance above the 100-day SMA. This could be seen as a new trigger for the bulls and supports the prospects for further appreciation in the short term. However, the NZD/USD pair remains on track to end the week with strong gains and post its highest weekly close since late May.
Market participants are now awaiting the release of the Michigan Consumer Sentiment Index, to be released later at the start of the American session. Also, US bond yields will boost demand for the dollar. Additionally, investors will also be inspired by the broader risk sentiment to take advantage of some short-term opportunities around the NZD/USD pair.
NZD/USD technical levels
Source: Fx Street
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