Mon, July 22, 2024

NZD/USD Falls to 0.6140 Amid Fed’s Hawkish Stance

NZD/USD - NZD USD digital trading chart.

Quick Look:

  • NZD/USD continues to decline, driven by a strong US Dollar and hawkish Fed remarks.
  • On June 17, 2024, the pair dropped to 0.6140. Further decline on June 18, 2024, below the 20-day EMA at 0.6130.
  • Fed’s cautious stance on rate cuts contributes to uncertainty and volatility in currency markets.

The NZD/USD currency pair has continued its downward trajectory, driven by the robust performance of the US Dollar. Recent market dynamics have contributed to a challenging environment for the New Zealand Dollar. The US Dollar is gaining strength amid positive economic signals from the United States.

NZD/USD Hits 0.6140 on Hawkish Fed

On June 17, 2024, the NZD/USD pair experienced a further decline to 0.6140. This drop was largely influenced by hawkish remarks from the Federal Reserve, which enhanced the appeal of the US Dollar. The market absorbed these statements. Therefore, confidence in the US Dollar grew, leading to the observed depreciation of the NZD/USD pair.

On June 18, 2024, the NZD/USD pair extended its losing streak for the third consecutive trading day. This persistent decline has been exacerbated by the ongoing tug-of-war between the Federal Reserve’s policy stance and market speculations regarding interest rate adjustments. The uncertainty surrounding future rate changes has added pressure to the New Zealand Dollar.

NZD/USD Below 20-day EMA at 0.6130

Furthermore, on June 18, 2024, the currency pair dipped below the 20-day Exponential Moving Average (EMA) at 0.6130. This movement suggests an uncertain near-term outlook, as technical indicators signal potential continued weakness in the pair.

On the same day, Federal Reserve policymakers acknowledged significant progress in controlling inflation. Therefore noting that it is approaching their 2% target. Despite this progress, they indicated that there is likely room for only one rate cut within the year. Showing a more conservative approach than some market participants had anticipated.

Market Expects Two Rate Cuts by December 2024

As reflected in the CME FedWatch tool, market expectations predict two rate cuts beginning in September and continuing in either November or December. This discrepancy between the Fed’s communicated plans and market expectations fuels uncertainty and volatility in the currency markets.

Recent economic data from China has also played a role in influencing the NZD/USD pair. The House Price Index for May 2024 showed a decline of 3.9%, reflecting continued weakness in the Chinese property market. Industrial production for the same month grew by 5.6%, which, although positive, was slower than expected. Year-to-date fixed asset investment saw a growth of 4%, again falling short of projections. In contrast, retail sales in May 2024 beat expectations, rising by 3.7% compared to the anticipated 3% and the previous month’s 2.3%.

Technical Outlook: NZD/USD Key Levels to Watch

From a technical analysis perspective, the NZD/USD pair currently exhibits an inverted head and shoulder pattern, with the neckline at 0.6215. Key indicators suggest a cautious outlook, such as the 20-day EMA at 0.6130 and the 14-period Relative Strength Index (RSI) between 40.00 and 60.00. Key levels to watch include the April 4 high of 0.6050, psychological support at 0.6000, the April 25 high of 0.5969, the June 12 high of 0.6222, the January 15 high of 0.6250, and the January 12 high of 0.6280.

NZD/USD Hits Recent Low of 0.610637

In recent trading sessions, the NZD/USD pair reached a high of 0.6221 last week but has since encountered a low of 0.610637. The June 10 low recorded at 0.60987, with the rising 200-bar Moving Average on the 4-hour chart currently at 0.60956. This price action reflects the pair’s struggle to maintain upward momentum amid broader market forces.

Looking ahead, the NZD/USD pair displays a bearish bias if it breaks below the 0.61000 level and sustains this movement. In this scenario, targets include the 38.2% retracement of the April low at 0.6078 and the 100 and 200-day Moving Averages ranging between 0.6060 and 0.60679. Conversely, a bullish bias would be considered if the pair holds above the 0.61000 level, with the target being a cluster of Moving Averages near 0.6151. The future direction largely depends on the interplay between US economic policies and global market reactions.

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