NZD/USD surges above 0.6550s, amidst a positive mood ahead of the US NFP

• The NZD/USD shifts to positive in the week, up by 0.34%.
• An upbeat market mood weighs on the greenback and boosts the NZD.
• Fed officials support 0.50% hikes in June and July but remain unsure about September.
• NZD/USD Price Forecast: A break above 0.6568 to open the door for further gains.

The NZD/USD soars in the New York session, pairing two days of consecutive losses, and is testing four-week highs, around 0.6560s, amidst an upbeat market sentiment session, as reflected by US equities registering gains. The NZD/USD is trading at 0.6555, near the daily highs, after reaching 0.6460 daily lows earlier in the European session.

On Thursday, sentiment improved, and equities recovered. The financial markets narrative stays the same. Worries about the US Federal Reserve tightening monetary policy and threatening to spur a recession in the US looms. JP Morgan’s CEO Jamie Dimon warned investors to prepare for an economic “hurricane” as the economy faces a combination of unprecedented challenges, according to Bloomberg.

Additionally to the abovementioned, the conflict between Ukraine-Russia, which has lasted for three months, has begun to weigh on food prices. Also, the latest China coronavirus outbreak, which triggered lockdowns for one month in Shanghai, now seemed controlled, could reappear on the scene.

Given the backdrop, the greenback remains on the defensive as the US Dollar Index shows, falling 0.77%, reversing Wednesday’s gains, sitting at 101.760. A tailwind for the NZD/USD, which fell for two consecutive days before retracing those losses, prepares to end the week on a higher note.

In the meantime, Fed officials continue to cross wires. Cleveland’s Fed President Loretta Mester supports 50 bps increases in the next couple of meetings and added that the Fed is well-positioned to consider the appropriate pace for further rate hikes.

Mester added that she is unsure how high rates need to go, and a pause on the tightening cycle would depend on data. Nevertheless, she emphasized that the Fed would slam the brakes if inflation remains stubbornly high, and she still keeps 25 or 50 bps rate hikes, contrarily to a pause in September.

Earlier on Thursday, the Fed’s Vice-Chairwoman Lael Brainard said that the central bank is getting mixed signals on the economy and that the number one challenge is bringing inflation down. When asked about a Fed pause, she said it is harder to say because the policy is not on a pre-set course via CNBC.

An absent New Zealand economic docket would leave NZD/USD traders leaning on US economic data.

In the meantime, the US calendar would release the May Nonfarm Payrolls report, ISM Non-Manufacturing, and Composite PMIs, alongside additional Fed speakers, ahead of the blackout of the June Federal Reserve Open Market Committee meeting.

NZD/USD Price Forecast: Technical outlook

The NZD/USD is surging higher and is testing May’s 5 swing high at 0.6568. Additionally, the Relative Strength Index (RSI) aims higher in bullish territory, with enough room before reaching overbought conditions. Therefore, the NZD rally would keep going, and a break above 0.6568 might pave the way for further gains. The following supply zone would be the 50-DMA at 0.6607. Once cleared would expose the 100-DMA at 0.6674, followed by the 200-DMA at 0.6815.

Key Technical Levels