- NZD/USD bulls moving in on critical daily resistance and the counter trendline
- RBNZ will be the focus now that the markets have traded the US CPI.
At 0.6857, NZD/USD is up some 0.5% and has travelled from a low of 0.6805 to a high of 0.6889 so far. However, the Us dollar has firmed in recent trade owing to a recovery in US yields and the hawkish narrative surrounding the Federal Reserve.
As measured by the DXY index, the US dollar is above the 100 level again after being below it at 99.74, the low for the start of the trading session. It is now printing fresh session highs of 100.332 as traders in the money markets rethink the outlook for the Federal Reserve despite the Core Consumer Price Index. The market was priced for a beat, but the core moved up by just 0.3%, below the 0.5% expectations and the smallest increase since September.
Nevertheless, the greenback did not stay down for long, and US Treasury's 10-year auction hit a high yield of 2.72% on Tuesday, up from the 1.92% high in the previous month, which has helped support a hawkish sentiment in markets. The bid to cover ratio for the auction was 2.43, down from the 2.47 ratio in March, and the 10-year yield is recovering from the day's lows.
Overall, US inflation expectations remain elevated, and if the US 10-year yield moves beyond the 2.836% high, it will be on track to test the October 2018 high near 3.26%. Additionally, Fed officials are likely to remain hawkish, and given the market, expectations are still for a 50 bp hike next month; the US dollar has embarked on fresh cycle highs, on track for the March 2020 high near 103.
RBNZ in focus
Meanwhile, the Reserve Bank of New Zealand is meeting this Wednesday and has much work to do, according to analysts at TD Securities. ''We suspect the Board realises this too. However, hiking in 25bps increments at consecutive meetings won't fit the bill. The Bank now needs to hike in 50bps increments at its next two meetings. We see no compelling reason for the Bank to await incoming data before deciding to act more aggressively.''
NZD/USD technical analysis
The M-formation is a reversion pattern, and the price is embarking on a restest of the prior support in a 38.2% Fibonacci retracement near 0.69 the figure. Given the break of the dynamic trendline support, the bias is to the downside from a medium-term perspective, but it may be a little premature to expect such a trajectory for now. Instead, the price needs to stay with the bulls for a bit longer, at least into the RBNZ meeting.
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.