The NZD/USD pair remained relatively stable around 0.5785 on Tuesday, finding it difficult to continue its initial recovery despite a slight drop in the US dollar. Although the pair bounced back from recent lows, momentum waned as investors opted for caution with the Federal Reserve’s monetary policy announcement approaching on Wednesday.
Pressure mounted on the US dollar after the Conference Board’s Consumer Confidence Index was adjusted upwardly to 90.8 for July, up from 92.2 in June. Additionally, a report by NER Pulse indicated that U.S. private employers averaged only 15,000 new jobs per week for the four weeks ending July 11, marking a fifth straight week of hiring slowdowns.
The New Zealand dollar found some backing from a significant drop in oil prices, as decreased energy costs enhance New Zealand’s economic outlook, particularly since the country is heavily dependent on fuel imports. However, a cautious market mood and uncertainties surrounding the Fed’s future guidance continue to impede the kiwi’s recovery.
On Wednesday, the Fed is widely anticipated to maintain interest rates. Investors will closely monitor the policy statement and the press conference led by Chairman Kevin Warsh for hints about upcoming changes. If the Fed leans hawkish, it could bolster the USD and push the NZD/USD down toward its recent lows. Conversely, more cautious language might encourage further recovery attempts.
Technical analysis:
Currently, NZD/USD is trading at 0.5788 on the 4-hour chart. The pair hovers slightly above the 20-period simple moving average (SMA) at 0.5783 and the 100-period SMA at 0.5787, indicating a tepid effort to establish a baseline after recent declines. A nearby cluster of horizontal levels keeps the short-term bias mostly neutral. The Relative Strength Index (14) stands at 47.8, just under the 50 mark, which implies that there’s no strong directional momentum as prices stabilize around short-term and medium-term averages.
On the upside, initial resistance appears at 0.5791, with another level close to 0.5799, while recent supply is likely to constrain any bounce. Breaking beyond these points could clear a path toward 0.5907, then 0.5930 and 0.5965. On the downside, immediate support is backed by the 100-period SMA at 0.5787 and the horizontal level at 0.5785, with the 20-period SMA at 0.5783 and the floor at 0.5779 limiting further decline. A sustained drop below this latter threshold could weaken the initial attempt to establish a base.
