- NZD/USD is in the hands of the bears and 0.6300 is eyed.
- The Fed is taking the spotlight for the open following last Friday's data.
NZD/USD is down some 0.3% on the day after falling from a high of 0.6350 and reaching a low of 0.6332 so far. There are prospects of a continuation towards 0.63 the figure as illustrated below, especially given the fundamental environment following last Friday's bearish close on Wall Street.
The US dollar rallied in the wake of Friday’s stronger than expected US inflation data, which analysts at ANZ Bank said, ''in turn saw a significant jump in US bond yields as markets started to wonder if the Fed might hike by 75bps this week. With somewhere between 50 and 75bps priced into markets, this makes Thursday’s Fed decision the key focus for markets as they contemplate if the Fed and other central banks might need to go a lot further than just 3½-4%, as most forecasters think at the moment. If this change in thinking is led by the US, then we could be in for a period of USD strength as markets adjust.''
Looking ahead to the week on the domestic calendar, New Zealand's first-quarter Gross Domestic Product will be a focus. ''This week we expect data to show that Omicron stalled GDP growth. We expect a bounce next quarter,'' the analysts at ANZ Bank argued saying that too could weigh on NZD sentiment.
Meanwhile, the latest NZIER Consensus Forecasts show a downward revision to the growth outlook over the coming years, despite the stronger starting point:
''The revisions reflect expectations of weaker activity across most sectors from 2023.
Although the recovery in demand was stronger than initially expected as lockdown restrictions were relaxed, there are increasing headwinds for the New Zealand economy. These headwinds include continued global supply chain disruptions as countries continue to grapple with COVID-19, the war in Ukraine and rising interest rates.''
NZD/USD technical analysis
The price is mitigating the price imbalance between the prior lows and 0.6290. A correction, however, would be expected which could appear on the 4-hour chart as follows:
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