NZD/USD sticks to daily gains above 0.70 as FOMC meeting looms
|- NZD/USD stays within the week-old range above 0.70.
- DXY turns red ahead of the FOMC meeting.
After closing the previous day a couple of pips above the 0.70 handle, the NZD/USD pair rose to a fresh daily high at 0.7050 and encountered a stiff resistance as it did yesterday. At the moment, the pair is trading at 0.7038, adding 0.45% on the day.
Although the pair is sticking to modest gains on the day, it remains directionless as it continues to fluctuate in the 0.70 - 0.7060 range since June 6. The FOMC announcements and the following press conference by the Fed Chairman Powell could be the next significant catalyst that could force the pair move out of this channel.
A 25 bps rate hike won't be a surprise at all and investors will be focusing on the official statement's language and the updated dot diagram as well as the economic projections.
"Economic data have indicated accelerating activity over the inter-meeting period, with an unemployment rate at 3.8% and inflation approaching the Committee’s 2% objective," Nomura analysts wrote in a recent report and further elaborated:
"Given that economic momentum has accelerated since March, we expect the Committee’s new rates forecast to reflect a total of four rate hikes in 2018, up from three previously. While a rate hike appears likely, we expect the mechanics of the policy change to be somewhat different in June”
Earlier in the session, the data released by the U.S. Bureau of Labor Statistics showed that the PPI rose more than expected with 0.5% and 3.1% on a monthly and yearly basis in May.
Technical outlook
With a daily close above 0.7060 (Jun. 6 high/upper hand of the weekly trading channel), the pair could extend its upside to 0.7100 (200-DMA/psychological level) and 0.7150 (100-DMA). On the downside, supports could be seen at 0.7000 (daily low/Jun. 12 low/psychological level), 0.6960 (Jun. 1 low) and 0.6880 (May 29 low).
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