- A mixed market mood did not stop the NZD from advancing vs. a “firmer” greenback.
- Fed’s Bullard favors a 50 bps rate hike and would like 1% increases by July 1. – BBG.
- NZD/USD Technical Outlook: The path of least resistance is tilted to the downside, as the uptrend stalled near the 50-DMA.
As market players get ready for the weekend, risk-off market mood looms the financial markets, to the detriment of the risk-sensitive New Zealand dollar. However, the NZD/USD so far hangs to its gains, trading at 0.6688 at the time of writing.
On Thursday, a hotter US inflation report spurred a jump in US Treasury yields, with the 10-year moving above the 2% threshold while US equities sold off. At the same time, the US Dollar pared some of its earlier losses, while the NZD/USD seesawed, closing 0.15% down in the day.
Friday’s story is slightly different. US Treasury yields, even though higher, ease a tone, with the 10-year down three basis points at 1.996%. Europan stock indices are mixed, while US equity futures are trending up. In the FX complex, the greenback is firm, with the DXY up 0.27%, at 95.76.
St. Louis Fed Preident James Bullard favors a 1% FFR by July 1
Meanwhile, ST. Louis Fed President James Bullard crossed the wires on Thursday, following the release of US CPI. Bullard said that based on the US CPI figure, he favors a 1% rate increase “in the bag” by July 1. When asked about a 50 bps increase by the March meeting, he said, “I [he] just don’t want to prejudge that meeting. There was a time when the committee would have reacted to something like this by just having a meeting right now and doing 25 basis points right now.”
Finally, Bullard added that he expects the balance-sheet runoff to start in the second quarter.
The economic docket is light on the day. The New Zealand docket featured the Business NZ PMI for January came at 52.1, shorter than the “revised” 53.8. Across the pond, the US docket featured the University of Michigan Consumer Sentiment Index (Prel) for February, which came at 61.7 vs. 67.5 estimated, also trailing the 67.2 of January. Further, Inflationary expectations rose to 5%, up from a previous 4.9%.
NZD/USD Price Forecast: Technical outlook
The NZD/USD so far in the week remains positive, +1.10%, but stalled its uptrend near the 50-day moving average (DMA) at 0.6742. Thursday’s price action left an inverted hammer candlestick, suggesting that selling pressure mounted around the 0.6700-30 area and will be challenging to overcome by NZD bulls.
Therefore, the NZD/USD path of least resistance is tilted downwards. The NZD/USD first support would be February 9 daily low at 0.6640. Breach of the latter would expose the February 4 swing low at 0.6588, followed by the January 28 low at 0.6529.
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