NZD/USD holds steady above 0.6200 ahead of US FOMC’s decision

• Despite the absence of a catalyst, NZD maintains dominance among major currencies fueled by expectations of Chinese economic stimulus.
• While other currencies falter against the strengthening US Dollar, NZD continues its rise, hinting at an unusual market dynamic.
• Investors eagerly await the Federal Reserve decision and Chair Jerome Powell’s statement, which could provide critical direction for NZD/USD.

The New Zealand Dollar (NZD) remains the strongest currency amongst the majors, despite the lack of a catalyst, amid speculations of further stimulus on China’s economy, while traders brace for Wednesday’s release of the US Federal Reserve monetary policy decision. The NZD/USD is exchanging hands at 0.6191 after hitting a daily low of 0.6155.

NZD/USD resilient amid speculations of China stimulus and mixed market mood

Market sentiment is mixed, as Wall Street opens with a positive tone. At the same time, European bourses begin to recover after the worst-than-expected Eurozone (EU) and UK PMI Manufacturing data suggest a global economic slowdown could trigger a shift in central bank tightening intentions.

US S&P Global PMI data showed a decent improvement in Manufacturing activity, advancing from 46.3 to 49, above estimates, while Services PMI dipped to 52.4 from 54.4 in June, below forecasts of 54. Consequently, the Composite PMI index slid to 52 in July from 53.2 in June. The data failed to boost appetite for the US Dollar (USD) against the NZD, which stands positive in the day.

However, the greenback remains trading higher as shown by the US Dollar Index (DXY), which tracks the buck’s performance against a basket of currencies, except for the NZD, which climbs 0.22%, at 101.305, propelled by the short-end of the curve US Treasury bond yields.

On the New Zealand front, an empty agenda left traders adrift to China and US dynamics. Firstly, China’s top leaders signaled that more stimulus is coming, as the country could miss its growth projections of 5% through 2023.

That, alongside Fed’s decision, would give direction on the pairs. A hike of 25 bps is inevitable, and the tone of the statement and Chair Jerome Powell’s press conference is most awaited, as investors would look to hawkish or dovish remarks, so the NZD/USD could gather some direction.

NZD/USD Price Analysis: Technical outlook

From a technical perspective, the NZD/USD is range-bound, slightly tilted downwards as it trades below the 200-day Exponential Moving Average (EMA), suggesting that further downside is expected. Furthermore, the break below the 100 and 50-day EMAs, at 0.6202, 0.6200, opened the door towards 0.6150, followed by a test of the 0.6100 mark. Conversely, a recovery above 0.6200 could open the door for a U-turn, which the Fed’s decision could trigger. Key resistance levels lie at 0.6200, 0.6220/30m, and then at June 16 daily high at 0.6247. With those levels cleared, the NZD/USD might challenge May’s 23 high at 0.6302.