- NZD/USD traded neutral in the 0.6230 area on Friday, but set a weekly gain of 1.70%.
- Hawkish Fed speakers and upbeat UoM data gave USD momentum.
- Rising US bond yields limited the Greenback’s move.
The NZD/USD it traded steady in the 0.6210 – 0.6245 range at the end of the week, holding on to a weekly gain of 170 pips. In this sense, hawkish spokespeople for the Federal Reserve System (Fed) raised US bond yields, while positive consumer confidence data from the University of Michigan added further support to the dollar. On the NZD side, relevant economic data has now been released and Kiwi gains appear to be limited by confirmation of the New Zealand economy entering recession following Wednesday’s gross domestic product (GDP).
The US dollar held its ground thanks to US bond yields
Fed Chairman Powell said on Wednesday that a pause in rate hikes was needed to assess additional information and its implications for Monetary Policywhile dot charts showed that members were projecting an additional 50 basis points of tightening for the rest of 2023. On that note, as stocks rose on Thursday, investors appeared to be in disbelief Fedso the speakers today were on the wires supporting the hawk case.
That said, the Fed’s Christopher Waller expressed his concerns about limited progress on core inflation and hinted at the potential need for further hikes. Later, the Fed’s Thomas Barkin said he was open to further action if the data warranted it. In response, short-term bond yields rose across the board on Friday. The 10-year yield rose to 3.76%, while the 2-year yield rose to 4.73% and the 5-year to 4.00%, with the 2-year rate leading the way, posting a 2% gain, supporting the USD.
In addition, the University of Michigan (UoM) released its consumer sentiment index for June, which beat forecasts to 63.9. This shows an increase in consumer confidence from the previous reading of 59.2. In addition, five-year consumer inflation expectations eased to 3% from an expected 3.1%, with the encouraging numbers also helping the dollar hold its ground.
NZD/USD levels to watch
Both the weekly and daily charts indicate an upward trend view for NZD. On the weekly chart, the pair is consolidating its third consecutive advance. Out of the last seven days, the Kiwi has posted gains in six of them. Additionally, both the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) suggest that buyers have the upper hand.
In case of a downward correction, immediate support is seen at the 100-day simple moving average (SMA) at 0.6218 followed by the psychological mark of 0.6200 and the 200-day SMA at 0.6150. On the other hand, resistance is placed at 0.6250 followed by 0.6300 (May 12 high) and the 0.62320 area.