The NZD/USD pair has hit a monthly low near 0.6076. This decline is due to the US Dollar strengthening following the Federal Reserve’s hawkish comments on interest rates. Fed officials, including Michelle Bowman, have indicated that interest rates will likely remain steady until there is evidence that inflation will reach the desired rate of 2%. This has led traders to believe that the earliest point for the central bank to begin tightening policy is at the September meeting. On the other hand, the Reserve Bank of New Zealand is expected to keep its Official Cash Rate steady at 5.5% for the year, despite inflation declining from the required 2%.
Technical analysis of the NZD/USD pair shows a breakdown of the Double Top chart pattern on a four-hour timeframe. This breakdown occurred after the pair moved below the swing low from June 10, near 0.6100, signaling a bearish reversal. The 50-period Exponential Moving Average near 0.6125 is acting as a barrier for Kiwi bulls, while the 14-period Relative Strength Index has fallen below 40. Traders may look for a pullback near 0.6100 as a selling opportunity, targeting levels near 0.6050 and psychological support at 0.6000. Conversely, a reversal above the June 12 high at 0.6222 could lead the pair towards higher levels near 0.6250 and 0.6280.
One important economic indicator to watch in this context is the Consumer Price Index ex Food & Energy (YoY). This index measures inflationary or deflationary trends by tracking the prices of a representative basket of goods and services. The YoY reading compares prices in the reference month to the same month in the previous year. The CPI Ex Food & Energy excludes volatile food and energy components to provide a more accurate measure of price pressures. A high reading is typically bullish for the US Dollar, while a low reading is seen as bearish.
In conclusion, the NZD/USD pair is under pressure as the US Dollar strengthens on the back of the Federal Reserve’s hawkish outlook on interest rates. With the Reserve Bank of New Zealand expected to keep rates steady and inflation still above the desired level, the Kiwi is facing headwinds. Technical analysis suggests a bearish reversal in the pair, with traders eyeing key levels for potential selling opportunities and reversals. Keeping an eye on economic indicators like the CPI ex Food & Energy can provide additional insights into the market’s direction. Investors should monitor developments in central bank policies and economic data releases to make informed trading decisions in the NZD/USD pair.
