NZD/USD trims post-Fed gains, all eyes on New Zealand GDP

• Dovish FOMC joined trade positive news to please Kiwi buyers. Though, nearness to GDP triggered cautious trading.
• Likely soft GDP figures could keep the pressure on RBNZ towards another rate cut.

While Fed’s dovish appearance benefited all the major currencies, except the US Dollar (USD) as usual, the New Zealand Dollar (NZD) is trimming some of its post-FOMC gains as investors turn cautious ahead of first quarter NZ GDP. With this, the NZD/USD pair trades near 0.6540 at the start of Thursday’s Asian session.

The US Federal Reserve dropped the word “patient” from the statement and also indicated rate cuts while the Chairman Jerome Powell’s press conference mentioned the economy solid. Investors concentrated more on the dovish part of the statement and downgraded inflation forecast.

As a result, the Kiwi pair initially extended its previous recovery led by trade positive news and gave little importance to the mixed current account data at home. However, traders remain on the sidelines at the start of the day when the first quarter (Q1) 2019 New Zealand GDP is up for release at 10:45 PM GMT.

Forecasts suggest the quarterly print arrive unchanged at 0.6% but an increase to 2.4% from 2.3% is expected as far as YoY numbers are concerned.

ANZ expects 0.4% QoQ and 2.2% yearly growth figures while mentioning the reasons as:

Key partial Q1 indicators have been a mixed bag: solid but slowing retail sales volumes, modest wholesale trade, very strong building work, but soft ex-primary manufacturing. We are likely to see a very weak per capita GDP outturn, as Statistics NZ’s new methodology for estimating net migration suggests the population grew strongly in Q1. We can expect more volatility and greater revisions in per capita GDP as a result of the very large revisions evident in reported net migration for the best part of a year under the new methodology.

The expected weakness in the GDP data could keep the rate cut pressure on the Reserve Bank of New Zealand (RBNZ) intact.

Following NZ GDP, the US weekly jobless claims and monthly result from the Philadelphia Fed manufacturing survey will be in the spotlight together with developments surrounding the US-China trade talks.

The US jobless claims are expected to decline to 220K from 222K while the manufacturing gauge might also slip to 11.0 from 16.6 during June month.

Technical Analysis

The Kiwi pair is yet to offer a sustained run up beyond 0.6560, which in turn could drag the pair to 0.6500 and 0.6480 during the fresh downturn. Also, pair’s extended declines below 0.6480 can recall October 2018 low near 0.6465 ahead of challenging the year 2018 bottom close to 0.6425.

Meanwhile, a successful break of 0.6560 can lead the pair to 50-day simple moving average (SMA) level of 0.6600 and then to current month high around 0.6682.