NZD/USD Performance Update
The NZD/USD currency pair broke a six-day losing streak on Thursday, largely due to a dip in the US dollar. This happened after the latest US personal consumption expenditure (PCE) data mostly met market forecasts. As of now, the pair is trading at approximately 0.5650, remaining close to its seven-month low.
According to the U.S. Bureau of Economic Analysis, the core PCE price index increased by 3.4% year-over-year in May, slightly up from 3.3% in April. On a month-to-month basis, core inflation held steady at 0.3%. Moreover, the composite PCE jumped from 3.8% to 4.1% year-over-year, reaching the highest annual rate since April 2023.
Traders reacted to the data by lowering expectations for a Federal Reserve interest rate hike in September, which contributed to a modest decline in the US dollar. The likelihood of a rate hike dropped to 60% from 67% before the inflation figures were released, as indicated by the CME FedWatch tool.
The dollar index (DXY), which measures the dollar against six major currencies, is around 101.40, after peaking at over a year high of 101.80 on Wednesday.
Technical Analysis
On the daily chart, the NZD/USD is currently below the 200-day simple moving average (SMA) at 0.5827 and the 100-day SMA at 0.5874, reflecting a bearish outlook in the near term.
The Relative Strength Index (RSI) is hovering near 29, pointing to an oversold condition. However, this mainly signals a potential for a corrective pullback rather than a complete trend reversal. Additionally, the average directional index (ADX) has moved above 30, indicating that the downward momentum is strengthening.
Looking at resistance levels, the first notable one is at 0.5700. If it breaks through 0.5770, it will encounter a cluster of medium-term moving averages, first at the 200-day SMA around 0.5827 and then at the 100-day SMA at 0.5874.
On the support side, immediate backing is at the horizontal level of 0.5600. If the pair falls below this mark, it could lead to new lows. However, staying above this level is essential for any meaningful recovery.
