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NZD/USD plummets to six-week lows, post-Powell’s remarks, shifting sentiment sour

  • NZD/USD plunges more than 1% on Friday, in a risk-off mood.
  • Powell said it would “bring some pain to households and businesses” in achieving the Fed’s 2% goal.
  • US inflation readings show signs of peaking while US consumer sentiment improves.

The NZD/USD dropped to fresh weekly lows of 0.8150 on Friday, following hawkish remarks by US Federal Reserve Chair Jerome Powell, reiterating the Fed’s job of restoring price stability towards the bank’s 2% target. Furthermore, he acknowledged that it will “require a sustained period of below-trend growth.” Consequently, sentiment shifted sour, with US equities falling off the cliff.

NZD/USD falls on Powell’s hawkish remarks and upbeat US economic data

In the Asian session, the NZD/USD opened above the 0.6220 figure, fluctuating within the 0.6180-0.6220 range ahead of US economic data releases and Powell’s remarks on Jackson Hole. Nevertheless, once Powell took the stand, the NZD/USD seesawed as volatility increased, sending the major to week’s lows. At the time of writing, the NZD/USD exchanges hands at 0.6148, well below its opening price.

Summarizing Powell’s remarks, he said that reducing inflation will “bring some pain to households and businesses” amidst a period of higher interest rates, softening labor market conditions, and sluggish economic growth. The Fed Chair reiterated that the Fed would “bring inflation back down to our 2% goal,” commenting that the central bank is taking rapid steps to curtail demand, so it better aligns to supply.

Jay Powell welcomed the July inflation figures but quickly added that a “single month improvement falls far short of what the Committee needs to see” regarding the direction of inflation. Powell noted that being around a neutral stance “was not a place to stop or pause,” pushing against the market’s perceptions of a Fed pivot that triggered a 15% rally ons US equities from June’s lows.

Aside from this, the US economic calendar unveiled the University of Michigan Consumer sentiment for August on its final release. American citizens’ sentiment improved to 58.2 vs. 55.2 estimates, while inflation expectations for a one-year horizon fell to 4.8% from 5.2% last month.

Earlier on Friday, the Fed’s favorite inflation gauge, headline, and core Personal Consumption Expenditures (PCE) price Indices for July. Headline PCE rose by 6.3% YoY, higher than the 6.2% estimated, while core PCE, which excludes volatile items, decelerates to 4.6% YoY vs. 4.7% forecast.

NZD/USD Key Technical Levels

NZD/USD

Overview
Today last price0.6148
Today Daily Change-0.0085
Today Daily Change %-1.36
Today daily open0.6233
 
Trends
Daily SMA200.6288
Daily SMA500.6251
Daily SMA1000.638
Daily SMA2000.6586
 
Levels
Previous Daily High0.6252
Previous Daily Low0.6174
Previous Weekly High0.6457
Previous Weekly Low0.6165
Previous Monthly High0.633
Previous Monthly Low0.6061
Daily Fibonacci 38.2%0.6222
Daily Fibonacci 61.8%0.6204
Daily Pivot Point S10.6188
Daily Pivot Point S20.6142
Daily Pivot Point S30.611
Daily Pivot Point R10.6265
Daily Pivot Point R20.6298
Daily Pivot Point R30.6343

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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