NZD/USD consolidates around 0.6400 level, set to snap seven week losing streak as RBNZ meeting looms
|- Having failed to break above its 21 DMA at 0.6413, NZD/USD has since fallen back to consolidate around 0.6400.
- The pair is on course for its first positive week in seven as traders prepared for next week’s RBNZ meeting.
Though risk assets broadly look set to end the week on a stronger footing, most have pulled back from earlier session highs since the open of US trade, with the kiwi no exception. NZD/USD was able to rally above the 0.6400 level earlier in the day, but ran into resistance at its 21-Day Moving Average at 0.6413 and has since dropped back to trade near 0.6400. That still leaves the pair trading with gains of about 0.3% on the day and around 1.75% on the week. That would mark NZD/USD’s first positive week in seven.
The main driver of this week’s gains has been a broad weakening of the US dollar, which seems to have been positioning based on more than fundamentals, given US economic data was mixed (April Retail Sales was strong but May Philly Fed Manufacturing survey was weak) and Fed commentary was hawkish. But the kiwi has also derived some support from domestic themes.
A spike in QoQ Producer Price Inflation rates, as revealed by data released on Thursday, has bolstered expectations for the RBNZ to hike interest rates by 50 bps next Wednesday. Meanwhile, Q1 Retail Sales data out on Tuesday ought to point to a robust New Zealand economy. This combo could keep the kiwi support next week, but broader risk appetite will also remain key.
Global equity markets were choppy this week, buffeted on the one hand by concerns about Fed tightening and weakening global growth, but then also lifted by constructive China updates (more monetary/fiscal stimulus and hopes for lockdown easing). If stocks continue to drop next week this could offer the buck some safe-haven support, while it may also benefit from any hawkish vibes from the Fed minutes out on Wednesday.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.