The NZD/USD saw a rise to about 0.5790 on Wednesday, bouncing back from an earlier drop as the US dollar took a significant hit following the Federal Reserve’s latest monetary policy update.
This currency pair originally declined due to heightened tensions in the Middle East, leading investors to seek safe-haven assets. Concurrently, oil prices surged, raising worries that climbing energy costs might keep global inflation elevated, potentially forcing central banks to sustain strict monetary policies for longer than anticipated.
However, the New Zealand dollar gained ground after the Federal Open Market Committee (FOMC) decided to keep the federal funds rate steady at 3.50% to 3.75%. Approved by a 9-3 vote, some members, like Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Laurie Logan, favored a 25 basis point increase. The Fed’s message had a somewhat hawkish tone, highlighting ongoing economic growth, a stable unemployment rate, and persistent inflation above the 2% target. They also pointed out that supply disruptions, especially in energy, are contributing to rising prices.
Despite the hawkish sentiment and three dissenting votes, the US dollar fell sharply after the announcement. The markets don’t seem to be fully factoring in a rate hike for September anymore, raising questions about whether a majority of policymakers would back tightening measures in their upcoming meeting.
Short-term technical analysis:
Looking at the 4-hour chart, NZD/USD is trading at 0.5795, staying above both the 20-period simple moving average (SMA) around 0.5784 and the 100-period SMA near 0.5791, which indicates a slight bullish outlook. The clustering of moving averages just below the current level suggests a potential base forming, while the Relative Strength Index (RSI) hovering above 50 indicates a recovery in upward momentum, though not overly strong.
On the upside, initial resistance is seen at 0.5804, with higher levels at 0.5907 and 0.5930, and a tougher barrier around 0.5965. For the downside, immediate support is near the 100-period SMA at 0.5791 and at horizontal lines around 0.5788 and 0.5778, with a more significant support area near 0.5768. As long as prices stay above this support band, bulls are likely to remain in control.
