NZD/USD: Fundamental Analysis + Possible Scenario
The NZD/USD pair continues to experience selling pressure for the second straight day on Tuesday, adding to the slight losses from the previous day. During the first half of the European day, spot prices reach a low that surpasses the previous week, and bears are attempting to push prices even lower below the horizontal support in the mid-0.6400s.
The safe-haven US Dollar receives a slight boost from the general sense of caution, which ends up being a major pressure point for the NZD/USD pair. Investors are still uncertain about a robust economic rebound despite the better-than-expected Chinese macroeconomic statistics provided earlier this Tuesday, especially in light of the country's worst-ever COVID-19 epidemic. This in turn reduces demand for assets seen as being riskier, such as the New Zealand dollar.
However, a recent decline in US Treasury bond yields may temporarily restrain the USD and assist in containing losses for the NZD/USD pair. The markets currently appear to be confident that the Fed will moderate its aggressive approach and announce a lower 25 bps rate hike on Wednesday at the conclusion of a two-day policy meeting. This further drives down US bond yields, which should prevent USD bulls from making further wagers.
The aforementioned fundamental background makes it smart to hold off on declaring that the NZD/USD pair has peaked out as we approach the key central bank event risk. Instead, we should wait for significant follow-through selling.
The US macro data, including the Chicago PMI and Conference Board's Consumer Confidence Index, are the following to be released. This will have an impact on the USD and give the NZD/USD pair some momentum, coupled with the general risk mood.
Technically speaking, sliding below the 0.6450 level indicates a fall of a trading range that has been in place for a week and raises the possibility of further declines. The next leg of the NZD/USD pair's directional move, however, can be decided by traders who would rather stay out of the market and wait for the FOMC policy decision, which is highly anticipated, to be announced on Wednesday.
The safe-haven US Dollar receives a slight boost from the general sense of caution, which ends up being a major pressure point for the NZD/USD pair. Investors are still uncertain about a robust economic rebound despite the better-than-expected Chinese macroeconomic statistics provided earlier this Tuesday, especially in light of the country's worst-ever COVID-19 epidemic. This in turn reduces demand for assets seen as being riskier, such as the New Zealand dollar.
However, a recent decline in US Treasury bond yields may temporarily restrain the USD and assist in containing losses for the NZD/USD pair. The markets currently appear to be confident that the Fed will moderate its aggressive approach and announce a lower 25 bps rate hike on Wednesday at the conclusion of a two-day policy meeting. This further drives down US bond yields, which should prevent USD bulls from making further wagers.
The aforementioned fundamental background makes it smart to hold off on declaring that the NZD/USD pair has peaked out as we approach the key central bank event risk. Instead, we should wait for significant follow-through selling.
The US macro data, including the Chicago PMI and Conference Board's Consumer Confidence Index, are the following to be released. This will have an impact on the USD and give the NZD/USD pair some momentum, coupled with the general risk mood.
Technically speaking, sliding below the 0.6450 level indicates a fall of a trading range that has been in place for a week and raises the possibility of further declines. The next leg of the NZD/USD pair's directional move, however, can be decided by traders who would rather stay out of the market and wait for the FOMC policy decision, which is highly anticipated, to be announced on Wednesday.
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