- NZD/USD edged lower on Thursday, though renewed USD selling helped limit losses.
- Receding bets for more aggressive Fed rate hikes continued weighing on the buck.
- Traders now look forward to the US economic releases for short-term opportunities.
The NZD/USD pair witnessed some selling on Thursday and moved away from a multi-week high, around the 0.6270-0.6275 region touched the previous day. The pair remained on the defensive through the early European session and was last seen trading around the 0.6225-0.6230 area, just a few pips above the daily low.
Following the recent strong rally of over 200 pips from the 0.6060 area, or the lowest level since May 2020, bulls took a brief pause amid fears about a possible recession. Investors remain concerned that rapidly rising borrowing costs, the Russia-Ukraine war and the latest COVID-19 outbreak in China would pose challenges to global growth. This, in turn, was seen as a key factor that acted as a headwind for the risk-sensitive kiwi, though the emergence of fresh US dollar selling helped limit the downside for the NZD/USD pair.
The USD struggled to capitalize on the previous day's bounce from its lowest level since July amid receding bets for a more aggressive rate hike by the Federal Reserve in July. It is worth recalling that several FOMC members said last week that they will likely stick to a 75 bps rate increase at the upcoming meeting on July 26-27. This, in turn, forced investors to scale back their expectations for a supersized 100 bps rate hike move, bolstered by the continuous surge in the US consumer inflation to a four-decade high in June.
Investors, however, seem convinced that the Fed would be forced to deliver a larger rate hike later this year to curb stubbornly high inflation. This was reinforced by elevated US Treasury bond yields, which should help limit deeper USD losses and continue to act as a headwind for the NZD/USD pair. That said, it would still be prudent to wait for strong follow-through selling before confirming that the recent recovery move has run out of steam. Market participants now look forward to the US macro data for some impetus.
Thursday's US economic docket features the release of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims later during the early North American session. This, along with the US bond yields, might influence the USD price dynamics and provide some impetus to the NZD/USD pair. Apart from this, traders will take cues from the broader market risk sentiment to grab short-term opportunities.
Technical levels to watch
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.