- NZD/USD gains strong positive traction on Thursday and reverses the overnight losses.
- The emergence of fresh USD selling is seen as a key factor lending support to the major.
- The Fed rate hike uncertainty, the cautious mood could limit USD losses and cap the pair.
The NZD/USD pair stages a solid bounce from the 0.6030-0.6025 region, or a one-week low touched this Thursday and builds on its momentum through the early part of the European session. Spot prices climb to the 0.6075-0.6080 area in the last hour and have now reversed the previous day's downfall.
The US Dollar (USD) struggles to build on Wednesday's goodish rebound from the weekly low and meets with a fresh supply, which, in turn, is seen as a key factor pushing the NZD/USD pair higher. That said, any meaningful appreciating move still seems elusive as investors remain uncertain about the Federal Reserve's (Fed) rate-hike path. Last week's dovish rhetoric by several Fed officials reaffirmed market expectations for an imminent pause in the US central bank's policy tightening cycle.
In fact, the current market pricing indicates a greater chance that the Fed will keep rates unchanged at its upcoming policy meeting on June 13-14. That said, the recent inflation and labor market data from the United States (US) kept alive hopes for a 25 bps lift-off next week. Furthermore, surprise rate hikes by the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) this week suggest that the fight against inflation is not over yet, supporting prospects for further tightening by the Fed.
The market expectations remain supportive of elevated US Treasury bond yields, which, along with the prevalent cautious mood, should limit losses for the safe-haven buck and cap gains for the perceived riskier Kiwi. The market sentiment remains fragile amid growing worries about a global economic slowdown, particularly in China. The concerns resurfaced after data released on Wednesday showed that China's trade surplus sank to a 13-month low in May, led by a slump in exports.
The data, meanwhile, pointed to weak overseas demand for Chinese goods and poses additional challenges for the world's second-largest economy. Apart from this, the Reserve Bank of New Zealand's (RBNZ) explicit signal that it was done with its most aggressive hiking cycle since 1999 might continue to undermine the New Zealand Dollar (NZD). This, in turn, suggests that the path of least resistance for the NZD/USD pair is to the downside, warranting some caution for bullish traders.
Technical levels to watch
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 consolidates weekly gains above 1.1150
EUR/USD moves up and down in a narrow channel slightly above 1.1150 on Friday. In the absence of high-tier macroeconomic data releases, comments from central bank officials and the risk mood could drive the pair's action heading into the weekend.
GBP/USD stabilizes near 1.3300, looks to post strong weekly gains
GBP/USD trades modestly higher on the day near 1.3300, supported by the upbeat UK Retail Sales data for August. The pair remains on track to end the week, which featured Fed and BoE policy decisions, with strong gains.
Gold extends rally to new record-high above $2,610
Gold (XAU/USD) preserves its bullish momentum and trades at a new all-time high above $2,610 on Friday. Heightened expectations that global central banks will follow the Fed in easing policy and slashing rates lift XAU/USD.
Week ahead – SNB to cut again, RBA to stand pat, PCE inflation also on tap
SNB is expected to ease for third time; might cut by 50bps. RBA to hold rates but could turn less hawkish as CPI falls. After inaugural Fed cut, attention turns to PCE inflation.
Bank of Japan set to keep rates on hold after July’s hike shocked markets
The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.