New Zealand Dollar Forecast: NZD/USD Eyes Q1 GDP, FOMC After Positive PSI

(MENAFN- DailyFX) New Zealand Dollar, NZD/USD, Monetary Policy -Talking Points

• Asia Pacific Markets look to US Dollar , Federal Reserve policy meeting
• New Zealand economy continues to grow as global trade reopens further
• NZD/USD finds itself at multi-month support zone, where to next?

Monday’s Asia-Pacific Outlook

Asia Pacific markets may stay under pressure this week if US Dollar strength proves resilient. That appears likely to be the case as economists and rate traders continue to move the timeline on monetary policy tightening to the left. The Federal Reserve’s rate decision due out Wednesday is the main event risk for global markets in the week ahead.

US Inflation figures came in hotter-than-expected last week. The US Dollar rose near half a percent last week via the DXY index. That is despite some cooling off in Treasury yields last week after the bond market faded the initial reaction to the CPI figures. That said, markets appear to now be buying into the premise that inflation is a temporary phenomenon, something the Fed has harped on repeatedly in recent months.

Risk-sensitive currencies fell against the stronger Greenback. The New Zealand Dollar had a particularly downbeat week as Kiwi Government bond yields fell. The benchmark 10-year yield fell near 11%. Rising milk prices – New Zealand’s top export – failed to underpin the currency, suggesting traders are more focused on monetary policy expectations right now.

BusinessNZ’s May Performance of Services Index crossed the wires this morning at 56.1 versus 61.2 in April, according to the DailyFX Economic Calendar . The above 50 figure represents the third consecutive month of growth in the island nation’s economy. As with last month, supply chain pressures were highlighted in the report, likely spurring additional inflationary pressures should they continue.

Later this week, New Zealand’s first-quarter gross domestic product (GDP) will cross the wires. An upbeat figure will likely spur some hawkish calls for the Reserve Bank of New Zealand’s (RBNZ) policy outlook. Finance Minister Grant Robertson spoke on the better-than-expected recovery. The Finance Minister went on to talk about stepped-up efforts to fight income inequality in the country.

NZD/USD Technical Outlook:

The New Zealand Dollar has fallen to an area of support from mid-April after putting in a multi-month high in May. NZD/USD ’s technical position appears weak at the current level, with a potential bearish Simple Moving Average (SMA) crossover on the horizon, which could add additional overhead weight to the currency pair.

A move higher would face a descending trendline from the May swing high. To the downside, a former area of support directly above the psychologically important 0.7000 area could be a downside target for bears, with the 100-day SMA as possible intermediate support.

NZD/USD Daily Chart

Chart created with TradingView

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--- Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter

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