- NZD/USD stages a modest recovery from a one-week low touched earlier this Thursday.
- A modest USD downtick lends some support to the pair, though the upside seems capped.
- The fundamental backdrop warrants some caution before placing aggressive bullish bets.
The NZD/USD pair attracts some buying near the 0.6025 area, or a one-week low touched during the Asian session on Thursday and recovers a part of the previous day's losses. The pair is currently placed around mid-0.6000s, up 0.20% for the day, albeit the intraday uptick lacks bullish conviction.
The US Dollar (USD) continues with its struggle to gain any meaningful traction and edges lower within a familiar trading band held over the past two weeks or so, which, in turn, lends some support to the NZD/USD pair. The uncertainty over the Federal Reserve's (Fed) rate-hike path is seen as a key factor holding back the USD bulls from placing aggressive bets. That said, elevated US Treasury bond yields, along with the caution market mood, should help limit the downside for the safe-haven Greenback.
Last week's dovish rhetoric by several Fed officials fueled speculations that the US central bank will keep rates unchanged at the June 13-14 policy meeting. That said, the inflation and labor market data keep alive hopes for a 25 bps lift-off. Moreover, 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 still not over. This supports prospects for further tightening by the Fed and acts as a tailwind for the US bond yields.
The market sentiment, meanwhile, remains fragile in the wake of the worsening global economic conditions. The concerns resurfaced after Chinese trade data released on Wednesday showed that the surplus sank to a 13-month low in May on the back of a slump in exports. The data indicated weak overseas demand for Chinese goods and poses challenges for the world's largest economy. This could weigh on antipodean currencies, including the Kiwi, and contribute to capping the NZD/USD pair.
This, along with the Reserve Bank of New Zealand's (RBNZ) explicit signal that it was done with its most aggressive hiking cycle since 1999, warrants caution before placing fresh bullish bets. Hence, it will be prudent to wait for strong follow-through buying before positioning for the resumption of the NZD/USD pair's recovery from the YTD low, levels just below the 0.6000 psychological mark touched last week. Market participants now look to the release of the Weekly Initial Jobless Claims data from the US.
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 holds below 1.0750 ahead of key US data
EUR/USD trades in a tight range below 1.0750 in the European session on Friday. The US Dollar struggles to gather strength ahead of key PCE Price Index data, the Fed's preferred gauge of inflation, and helps the pair hold its ground.
USD/JPY stays firm above 156.00 after BoJ Governor Ueda's comments
USD/JPY stays firm above 156.00 after surging above this level on the Bank of Japan's decision to leave the policy settings unchanged. BoJ Governor said weak Yen was not impacting prices but added that they will watch FX developments closely.
Gold price oscillates in a range as the focus remains glued to the US PCE Price Index
Gold price struggles to attract any meaningful buyers amid the emergence of fresh USD buying. Bets that the Fed will keep rates higher for longer amid sticky inflation help revive the USD demand.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
US core PCE inflation set to signal firm price pressures as markets delay Federal Reserve rate cut bets
The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.3% on a monthly basis in March, matching February’s increase.