- NZD/USD struggles to defend 0.7100 amid a corrective pullback.
- Market sentiment remains sluggish ahead of the FOMC.
- NZ GDT Price Index dropped, RBNZ adds house price control as a policy tool.
- Aussie, China data can entertain intraday traders but cautious mood can keep pressing Kiwi ahead of the Fed’s verdict.
NZD/USD stays sidelined around 0.7120, recently easing, as bears take a breather around a two-month low during the early Asian session on Wednesday. The kiwi pair portrayed the double whammy of mildly bid US dollar and downbeat data at home to refresh the multi-day low. However, the pre-Fed caution seems to probe the quote’s latest moves.
US dollar index (DXY) jumped to the fresh high since May 14 before easing to 90.52 by the end of Tuesday’s North American session. In doing so, the greenback gauge versus the six major currencies prints mild gains, benefiting from the market’s rush to risk safety ahead of the Federal Open Market Committee (FOMC) meeting.
A mixed play of May’s US Retail Sales and Producer Price Index (PPI) could be traced as the latest catalyst backing the reflation fears. While Retail Sales dropped -1.3% versus -0.8% expected the PPI rose more than 6.3% forecast to 6.6% YoY.
Also contributing to the NZD/USD weakness could be New Zealand’s (NZ) downbeat GDT Price Index, -1.3% versus -0.1% expected and -0.9% prior. It’s worth noting that Whole Milk Powder (WMP) also registered a fall of 1.8% during the last 15 days’ tally. Also, downbeat prints of NZ Current Account-GDP ratio and Current Account Balance for Q1 2021 kept the pair sellers hopeful of late.
Amid these plays, US stocks posted mild losses and the Treasury yields also snapped a two-day uptrend amid cautious sentiment. Additionally, escalating tension between the Western economies and China also weighs on the NZD/USD prices as Beijing is Auckland’s largest customer. Furthermore, chatters that the RBNZ adds house price control measures to its tool, hesitantly though, exert additional downside pressure on the Kiwi pair.
Moving on, China’s Retail Sales and Industrial Production, preceded by second-tier data from Australia, can offer intermediate moves to the NZD/USD pair amid a likely sluggish day heading into the Fed’s meeting.
“We expect the Fed’s near-term inflation profile and dot plot will be revised up. However, the Fed is seeking a full recovery in jobs and we therefore expect Chairman Powell will continue to argue that the rise in inflation is transitory and that the Fed is well equipped to respond to higher inflation if necessary. The market will also be sensitive to any advancement in the Fed’s thoughts around tapering,” said analysts at the Australia and New Zealand Banking Group (ANZ).
Read: Fed Interest Rate Decision Preview: Chair Powell will determine market response
Technical analysis
NZD/USD remains vulnerable to the further downside amid sustained trading below 100-day SMA, around 0.7180. That said, lows marked during January and early May highlight the 0.7100 threshold as the nearby key support ahead of the 200-day SMA surrounding 0.7040.
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 drops below 1.0800 after German Retail Sales data
EUR/USD has come under fresh selling pressure and trades below 1.0800 after the data from Germany showed that Retail Sales declined by 1.9% MoM in February. Resurgent US Dollar demand is adding to the downside in the pair. US data are next in focus.
GBP/USD stays weak near 1.2600 amid market caution
GBP/USD remains defensive near 1.2600 in European trading on Thursday. The hawkish tone from Fed Governor Christopher Waller keeps the US Dollar afloat amid a cautious trading environment ahead of key US data releases and the Good Friday trading lull.
Gold price bulls keenly await US PCE Price Index on Friday before placing fresh bets
Gold price (XAU/USD) continues with its struggle to make it through the $2,200 mark on Thursday and oscillates in a narrow trading band through the early part of the European session.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
The other terminal rate: How far will policy rates be cut?
Recent communication by the Federal Reserve and the ECB has made it clear that the first cut in official interest rates is coming. Both central banks are saying the same but the ECB communication is more opaque than that of the Fed.