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NZD/USD finds some support near 0.5900, upside potential seems limited amid bullish USD

  • NZD/USD struggles to capitalize on its modest uptick led by the upbeat New Zealand GDP data.
  • The Fed’s hawkish outlook, rising US bond yields continue to underpin the USD and cap gains.
  • A softer risk tone also benefits the safe-haven USD and supports prospects for deeper losses.

The NZD/USD pair attracts fresh sellers following an intraday uptick to mid-0.5900s and drops to a fresh daily low during the early part of the European session on Thursday. Spot prices, however, manage to defend the 0.5900 round figure, though the fundamental backdrop supports prospects for an extension of the retracement slide from a nearly three-week high, around the 0.5985 region touched on Wednesday.

The New Zealand Dollar (NZD) did get a minor lift earlier today in reaction to the better-than-expected domestic data, showing that the economy expanded by 0.9% in the June quarter. Adding to this, the first quarter reading was also revised higher to 0.0% from a 0.1% contraction reported originally. The NZD/USD pair, however, struggles to attract any meaningful buying and the intraday uptick runs out of steam rather quickly in the wake of some follow-through US Dollar (USD) buying, bolstered by the Federal Reserve's (Fed) hawkish stance.

As was widely anticipated, the US central bank decided to keep interest rates unchanged at a 22-year high, though warned that sticky inflation was likely to attract at least one more interest rate hike in 2023. Furthermore, policymakers maintained the forecast for rates to peak between 5.5%-5.75% by the end of this year and see the benchmark rate at 5.1% next year, suggesting just two rate cuts in 2024 as compared to four projected previously. This remains supportive of rising US Treasury bond yields and lifts the USD back closer to a six-month top.

In fact, the yield on the rate-sensitive two-year US government bond rallies to its highest level since July 2006 and the benchmark 10-year US Treasury yield touches a 16-year peak. This revives concerns about headwinds stemming from rapidly rising borrowing costs and weighs on investors' sentiment. This is evident from a weaker tone around the equity markets, which should benefit the safe-haven buck and contribute to driving flows away from the risk-sensitive Kiwi, validating the negative outlook for the NZD/USD pair.

That said, a modest intraday USD pullback assists spot prices to defend the 0.5900 mark. Market participants now look to the US economic docket  – featuring the release of the usual Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales data later during the early North American session. This, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and produce short-term trading opportunities around the NZD/USD pair.

Technical levels to watch

NZD/USD

Overview
Today last price0.5918
Today Daily Change-0.0011
Today Daily Change %-0.19
Today daily open0.5929
 
Trends
Daily SMA200.5918
Daily SMA500.6035
Daily SMA1000.6103
Daily SMA2000.6192
 
Levels
Previous Daily High0.5987
Previous Daily Low0.592
Previous Weekly High0.5945
Previous Weekly Low0.588
Previous Monthly High0.6219
Previous Monthly Low0.5885
Daily Fibonacci 38.2%0.5946
Daily Fibonacci 61.8%0.5962
Daily Pivot Point S10.5904
Daily Pivot Point S20.5878
Daily Pivot Point S30.5836
Daily Pivot Point R10.5971
Daily Pivot Point R20.6013
Daily Pivot Point R30.6038

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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