NZD/USD falls further to 0.6140 as the Fed’s hawkish remarks improve the US Dollar’s appeal, prompting market speculation for interest rate cuts. The pair extends its losing streak for the third trading day as the US Dollar remains strong amid uncertainty over the Fed’s decision on rate cuts.
Fed policymakers have noted progress in inflation declining to the bank’s target of 2%, but want to see price pressures declining for months before considering rate cuts. Market expectations for two rate cuts this year have increased following soft inflation reports. The CME FedWatch tool shows predictions for rate cuts starting from the September meeting, with potential cuts in November or December as well.
The New Zealand Dollar weakens due to China’s economic indicators showing uncertainty over the economic outlook. Various indicators such as House Price Index deflation and slower than expected growth in Industrial Production and Fixed Asset Investment have impacted the NZD. The New Zealand economy is closely tied to China as a trading partner, making it susceptible to shifts in China’s economic performance.
The NZD/USD pair is attempting to break out of the Inverted Head and Shoulder chart pattern on a daily timeframe, with the neckline marked near 0.6215. The pair has dropped below the 20-day Exponential Moving Average, signaling an uncertain near-term outlook. The 14-period Relative Strength Index falls into the 40.00-60.00 range, indicating a fading upside momentum in the pair.
If the pair breaks below April 4 high around 0.6050, it could head towards psychological support at 0.6000 and April 25 high at 0.5969. On the other hand, a reversal move above June 12 high of 0.6222 may lead to further upside towards January highs near 0.6250 and 0.6280.
Overall, the NZD/USD pair is facing downward pressure due to hawkish Fed remarks boosting the US Dollar’s appeal and market speculation for rate cuts. The pair’s movement is also influenced by weak economic indicators from China, which impact the New Zealand economy. Traders are closely watching the Fed’s decision on interest rates, with expectations for potential rate cuts later this year.
