- The NZD/USD reversed its course and fell towards 0.5930, after reaching a high of 0.5985.
- The US Dollar strengthened on the back of rising US yields after the Fed’s hawkish pause.
- The Fed kept rates at 5.25-5.50% as expected.
- The bank reduced projections of 100 bps of rate cuts in 2024 to 50 bps.
In Tuesday’s session, the NZD/USD saw volatility trading in the 0.5924 – 0.5985 and clearing all of its daily gains. The US Dollar recovered as the Federal Reserve (Fed) hinted at one more hike and pushed back rate cuts in 2024.
Investors assess the Federal Reserve’s decision
The US Federal Reserve, as expected, didn’t hike interest rates but surprised with a somewhat more hawkish stance, causing the market to fly to safety. They hinted at a single rate hike of 25 basis points later this year as the Summary of Economic Projection’s (SEM) so-called dot plots median rate remained at 5.6% and reduced future rate cut projections for 2024 from 100 to 50 basis points. This shift led markets to anticipate a rate cut not before September 2024.
During the press conference, Chair Powell emphasised their priority is a smooth economic transition and mentioned the importance of price stability. He then added that the decisions will be decided meeting by meeting, relying solely on incoming data. However, he did not hesitate to comment that the Fed is prepared to hike rates further if necessary.
After the press conference, the short-term US yields stand at multi-year highs, with the 2,5 and 10-year rates rising to 5.15%, 4.55% and 4.36%, their highest in more than 10-year, which seems to make the USD gain interest. In line with that, the DXY index rose back above 105.00 and cleared daily losses.
NZD/USD Levels to watch
Despite the drop, the technical analysis of the daily chart suggests a neutral to bullish stance for NZD/USD as the bulls work on recovering their ground. Having turned flat in negative territory, the Relative Strength Index (RSI) suggests a potential market equilibrium with balanced selling and buying pressure,while the Moving Average Convergence (MACD) histogram presents larger green bars. In addition, the pair is above the 20-day Simple Moving Average (SMA), but below the 100 and 200-day SMAs, indicating that the bulls aren’t done yet and that the outlook is still positive for the short term.
Support levels: 0.5920 (20-day SMA), 0.5890, 0.5860.
Resistance levels: 0.6000,0.6030, 0.6050.
NZD/USD Daily chart