Published on Jun 16, 2023

Daily Analysis For NZD/USD 16-06-2023

NZD/USD Analysis

Key Points: -

· NZD/USD pair displays relentless upward momentum, reaching a level not seen in almost four weeks.

· The ongoing bearish sentiment surrounding the USD, driven by dovish Fed expectations, plays a supporting role in this ascent.

· Moreover, the risk-on sentiment prevailing in the market exerts additional pressure on the weakening greenback, thereby favoring the Kiwi, which is known for its responsiveness to risk factors.

Today's Scenario: -

The NZD/USD pair continues its upward movement, which started at the beginning of the current month, and reaches a high that hasn't been seen in over three weeks on Friday. It maintains a positive sentiment, slightly below the mid-0.6200s range as the European session approaches, and has now successfully crossed above a significant technical indicator, the 200-day Simple Moving Average (SMA).

The US Dollar (USD) struggles to recover and remains at a five-week low, contributing to the NZD/USD pair's strength. Despite the Federal Reserve's (Fed) indication that interest rates may need to rise by up to 50 basis points by the end of the year, investors believe that the central bank is nearing the peak of its tightening cycle. Additionally, lackluster US macro data from Thursday raises concerns about how much room the Fed has to continue raising rates, further undermining the US currency.

Furthermore, the positive sentiment prevailing in the equity markets adds pressure on the safe-haven US Dollar and benefits the risk-sensitive New Zealand Dollar (Kiwi). However, worries about a global economic downturn, especially in China, may limit optimism. Moreover, a slight increase in US Treasury bond yields might curb the USD's losses. The Reserve Bank of New Zealand's (RBNZ) clear indication that it has concluded its most aggressive rate-hiking cycle since 1999, coupled with a technical recession in New Zealand, could also deter bullish positions on the NZD/USD pair.

Nevertheless, spot prices are on track to record substantial weekly gains and secure their third consecutive week in positive territory. With no significant US economic releases, traders on Friday will look to Governor Christopher Waller's public appearance during the early North American session for guidance. The direction of US bond yields will also influence USD price dynamics and provide some momentum for the NZD/USD pair. Additionally, overall market sentiment may create short-term trading opportunities on the final day of the week.

Diagram of NZD/USD: -

Economic Events: -

Date Event Impact Currency

01:30 (United States) Foreign Bond Investment Low USD

01:30 (United States) Net Long-term TIC Flows Medium USD

01:30 (United States) Overall Net Capital Flows Low USD

04:00 (New Zealand) Business NZ PMI Medium NZD

08:30 (Japan) BoJ Interest Rate Decision High JPY

12:30 (Austria) Inflation Rate MoM Low EUR

12:30 (Austria) Inflation Rate YoY Low EUR

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

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

12:30 (Austria) CPI High EUR

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

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

12:30 (United States) Fed Bullard Speech Medium USD

13:30 (European Union) ECOFIN Meeting Medium EUR

13:30 (Italy) Inflation Rate YoY Medium EUR

13:30 (Italy) Harmonised Inflation Rate MoM Low EUR

13:30 (Italy) Harmonised Inflation Rate YoY Low EUR

13:30 (Italy) Inflation Rate MoM Low EUR

13:30 (Italy) CPI High EUR

14:30 (Euro Area) Inflation Rate MoM Low EUR

14:30 (Euro Area) Core Inflation Rate YoY Low EUR

14:30 (Euro Area) Inflation Rate YoY Medium EUR

14:30 (Euro Area) Labour Cost Index YoY Low EUR

14:30 (Euro Area) Wage Growth YoY Low EUR

14:30 (Euro Area) CPI High EUR

14:30 (Malta) Inflation Rate YoY Low EUR

15:30 (Portugal) PPI YoY Low EUR

15:30 (Portugal) PPI MoM Low EUR

17:15 (United States) Fed Waller Speech Medium USD

18:00 (Canada) Foreign Securities Purchases Low CAD

18:00 (Canada) Foreign Securities Purchases by Canadians Low CAD

18:00 (Canada) Wholesale Sales MoM Low CAD

19:30 (United States) Michigan Consumer Sentiment High USD

19:30 (United States) Michigan Inflation Expectations Low USD

19:30 (United States) Michigan Current Conditions Low USD

19:30 (United States) Michigan 5 Year Inflation Expectations Low USD

19:30 (United States) Michigan Consumer Expectations Low USD

22:30 (United States) Baker Hughes Oil Rig Count Low USD

22:30 (United States) Baker Hughes Total Rig Count Low USD

Buy Scenario: -

On the upside, if NZD/USD buyers manage to surpass the latest peak of 0.6250, they could target the 23.6% Fibonacci retracement level around 0.6300.

However, the Kiwi pair buyers will face significant challenges beyond that, as they attempt to break through a 4.5-month-old resistance line near 0.6330 and a horizontal area ranging from 0.6385 to 0.6390, which has acted as a barrier since early February. Till we do not advise to buy NZD/USD.

Sell Scenario: -

Nevertheless, intraday traders can find support for the NZD/USD price around the 100-day moving average (DMA) at approximately 0.6220. Additionally, the bullish signals from the MACD indicator reinforce the significance of this level. A breach of this support could quickly push the quote towards the 38.2% Fibonacci retracement level of the upside movement from October 2022 to February 2023, near 0.6150.

Subsequently, the focus will shift to the resistance-turned-support line that extends from early May, currently around 0.6120.

If the NZD/USD drops below the 0.6120 support, there is a possibility of a southward move towards the previous monthly low of approximately 0.5985. Till we do not advise to sell NZD/USD.