Quick Look:
- The NZD/USD hovers around 0.6000 during Tuesday’s early Asian session.
- The US Dollar Index (DXY) is above 104.00, recently retreating from peaks.
- US PCE data, New Zealand ANZ Business Confidence, and other key reports ahead.
Recent US economic data have painted a picture of an economy experiencing nuanced shifts. February saw new home sales dip by 0.3% month-over-month. It is clear a reversal from January’s 1.7% gain and below market expectations of a 2.3% rise. This indicates a cooling in a sector often serving as a barometer for broader economic health. Moreover, the Dallas Fed Manufacturing Survey for March highlighted a continued contraction in manufacturing activity. A reading fell to -14.4 from -11.3, underscoring the challenges faced by the manufacturing sector.
US PCE Data Awaited: NZD/USD Inflationary Pulse Check
Looking ahead, the market eagerly anticipates the release of US Personal Consumption Expenditures (PCE) data on Friday. With forecasts suggesting a 0.4% month-over-month increase in the headline PCE and a 0.3% rise in the core PCE, these figures will be crucial in gauging inflationary pressures. Therefore, they could influence the Federal Reserve’s monetary policy decisions. Notably, expectations of an interest rate cut by the Fed in June have surged, with the CME Group’s FedWatch tool indicating a 74.5% likelihood of such a move.
NZ Enters Recession: RB NZ’s Rate Cut Outlook
On the other side of the Pacific, New Zealand‘s economy entered a technical recession in the fourth quarter of 2024, attributed to weak consumer spending and wholesale trade. This downturn poses significant challenges for the NZD, especially with the Reserve Bank of New Zealand (RBNZ) maintaining its cash rate at 5.50%. The market anticipates a cumulative 73 basis points in rate cuts throughout the year, reflecting concerns over economic momentum.
NZD/USD’s Bearish Trend: EMA50 Pressure
From a technical perspective, the NZD/USD pair’s bearish trend is evident, with the 50-day Exponential Moving Average (EMA50) exerting negative pressure. The lack of a significant bounce further reinforces this bearish outlook, indicating that substantial support may not emerge until the 0.5850 level. Conversely, a close above 0.6000 could inject optimism among traders.
The NZD/USD trading landscape is delicately poised, influenced by several economic indicators and events. As investors and traders navigate this terrain, the forthcoming economic data releases, particularly the US PCE report and New Zealand’s ANZ Business Confidence index, will likely serve as pivotal points. These releases could either confirm the current bearish trend or provide the impetus for a reversal.
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