Published on Jun 13, 2023

Daily Analysis For NZD/USD 13-06-2023

NZD/USD Analysis

Key Points: -

· The NZD/USD pair has regained upward momentum on Tuesday, reaching its highest level in nearly three weeks.

· Multiple factors are contributing to the weakness of the USD, supporting the positive movement.

· Traders are now closely watching the release of the US Consumer Price Index (CPI) for potential new driving forces ahead of the Federal Open Market Committee (FOMC) meeting on Wednesday.

Today's Scenario: -

The NZD/USD pair has attracted fresh buying near the 0.6100 level on Tuesday, continuing its upward movement throughout the first half of the European session. This momentum has propelled the pair to a nearly three-week high, reaching around the 0.6155 region. The rise in price is supported by a renewed selling bias towards the US Dollar (USD).

The USD Index (DXY), which measures the strength of the USD against a basket of currencies, has fallen to its lowest level since May 18. This decline is primarily driven by expectations that the Federal Reserve (Fed) will refrain from raising interest rates in June. Recent dovish comments from several FOMC members have increased speculation of an imminent pause in the central bank's year-long tightening cycle. Consequently, US Treasury bond yields have dropped further, putting pressure on the USD and providing tailwinds for the NZD/USD pair.

Additionally, the overall positive sentiment in equity markets is contributing to the weakening of the safe-haven USD and benefiting the risk-sensitive New Zealand Dollar (Kiwi). However, concerns about a global economic slowdown, particularly in China, may limit the extent of the optimism. Moreover, surprise rate hikes by other major central banks, such as the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) last week, indicate that the battle against inflation is not yet over. This has fueled speculation about another 25 basis points rate hike by the Fed in July.

Despite the Reserve Bank of New Zealand (RBNZ) signaling the end of its most aggressive hiking cycle since 1999, some investors may hold back from making aggressive bets on the NZD/USD pair. Market participants might prefer to wait on the sidelines ahead of the release of the latest US consumer inflation figures, scheduled for later during the early North American session. The crucial US Consumer Price Index (CPI) report will have an impact on the Fed's next policy decision, which is set to be announced after the highly-anticipated two-day monetary policy meeting on Wednesday.

Diagram of NZD/USD: -

Economic Events: -

Date Event Impact Currency

4:15 (New Zealand) Visitor Arrivals YoY Low NZD

5:20 (Japan) BSI Large Manufacturing QoQ Low JPY

6:00 (Australia) Westpac Consumer Confidence Change High AUD

6:00 (Australia) Westpac Consumer Confidence Index High AUD

7:00 (Australia) NAB Business Confidence High AUD

11:30 (Germany) Harmonised Inflation Rate MoM Low EUR

11:30 (Germany) Harmonised Inflation Rate YoY Low EUR

11:30 (Germany) Inflation Rate MoM Medium EUR

11:30 (Germany) Inflation Rate YoY Medium EUR

11:30 (Germany) CPI High EUR

11:30 (United Kingdom) Average Earnings excl. Bonus (3Mo/Yr) Low GBP

11:30 (United Kingdom) Average Earnings incl. Bonus (3Mo/Yr) Medium GBP

11:30 (United Kingdom) Unemployment Rate High GBP

11:30 (United Kingdom) Claimant Count Change High GBP

11:30 (United Kingdom) Employment Change High GBP

11:30 (United Kingdom) HMRC Payrolls Change Low GBP

12:30 (Lithuania) Current Account Low EUR

12:30 (Spain) CPI High EUR

12:30 (Spain) Core Inflation Rate YoY Low EUR

12:30 (Spain) Harmonised Inflation Rate MoM Low EUR

12:30 (Spain) Harmonised Inflation Rate YoY Low EUR

12:30 (Spain) Inflation Rate MoM Low EUR

12:30 (Spain) Inflation Rate YoY Low EUR

13:30 (China) Total Social Financing Low CNY

13:30 (China) New Yuan Loans Low CNY

13:30 (China) M2 Money Supply YoY Low CNY

13:30 (China) Outstanding Loan Growth YoY Low CNY

14:10 (Spain) 3-Month Letras Auction Low EUR

14:30 (Euro Area) ZEW Economic Sentiment Index Medium EUR

14:30 (Germany) ZEW Economic Sentiment Index High EUR

14:30 (Germany) ZEW Current Conditions Low EUR

14:30 (United Kingdom) 10-Year Treasury Gilt Auction Low GBP

14:40 (Italy) 3-Year BTP Auction Low EUR

14:40 (Italy) 7-Year BTP Auction Low EUR

14:40 (Italy) 30-Year BTP Auction Low EUR

15:00 (Germany) 5-Year Bobl Auction Low EUR

15:15 (Euro Area) ECB Enria Speech Low EUR

15:30 (Latvia) Current Account Low EUR

15:30 (United States) NFIB Business Optimism Index Low USD

17:30 (Ecuador) Balance of Trade Low USD

18:00 (United States) Core Inflation Rate MoM Medium USD

18:00 (United States) Inflation Rate MoM High USD

18:00 (United States) Core Inflation Rate YoY High USD

18:00 (United States) Inflation Rate YoY High USD

18:00 (United States) CPI High USD

18:00 (United States) CPI s.a High USD

18:15 (Germany) Current Account Low EUR

18:25 (United States) Redbook YoY Low USD

19:30 (United Kingdom) BoE Gov Bailey Speech Medium GBP

20:30 (United Kingdom) BoE Dhingra Speech Low GBP

21:00 (United States) 52-Week Bill Auction Low USD

22:30 (United States) 30-Year Bond Auction Low USD

Buy Scenario: -

The recent weakness in the NZD/USD pair aligns with the formation of a Doji candlestick on the Daily chart, indicating a potential reversal. The bearish candlestick holds significance as it corresponds to the rejection of the key resistance level around 0.6150, which includes the 200-day moving average (DMA) and a previous support line dating back to early March.

It's worth noting that a descending trend line, in place for the past month and currently around 0.6145, adds further strength to the aforementioned resistance level.

As a result, the pair is likely to remain under bearish pressure unless it surpasses the hurdle at 0.6150.

If NZD/USD buyers manage to break above the 0.6150 resistance, they may face additional challenges at the mid-May swing low around 0.6185 and the psychological level of 0.6200 before gaining control. Till we do not advise to buy NZD/USD.

Sell Scenario: -

On the downside, the pair is expected to face pressure towards the 0.6100 level. However, there is an ascending support line from May 31, currently near 0.6045, which could present a hurdle for bearish momentum in NZD/USD.

In the event that the pair remains bearish and falls below 0.6045, the possibility of a decline towards the yearly low reached in May around 0.5985 cannot be ruled out. Till we do not advise to sell NZD/USD.