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NZD/USD price forecast: post-FOMC bounce hits snag on downbeat GDP data

New Zealand dollar rally may stall on downbeat economic data after FOMC bounce; New Zealand’s first-quarter GDP growth at -0.2% q/q, missing analysts’ estimates and NZD/USD recovers after setting fresh yearly low.

Source: Bloomberg

Thursday’s Asia-Pacific outlook

The New Zealand dollar rose against a broadly weaker US dollar overnight after the Federal Reserve announced a 75-basis-point rate hike. Bond traders bought Treasuries following the FOMC announcement, pulling down dollar-friendly Treasury yields, particularly at the short end of the curve. The DXY Index fell slightly more than half a percent moving into Asia-Pacific trading.

Earlier this week, NZD/USD fell to its lowest level since June 2020, driven by Greenback strength and a shift from risk-sensitive currencies. A pullback in specific commodity prices also weighed on the New Zealand Dollar following Chinese Covid-19 lockdowns over the last several months. New Zealand’s bond yield premium versus Treasuries rose to its highest point since May 12 this morning when comparing the 5-year tenures. A higher relative yield helps to attract capital flows.

New Zealand reported first-quarter gross domestic product (GDP) growth this morning. Quarter-over-quarter growth crossed the wires at -0.2%, missing the 0.6% q/q consensus estimate, according to a Bloomberg survey. The lower-than-expected growth rate may weigh on the Kiwi Dollar in the coming weeks, as it likely complicates the Reserve Bank of New Zealand’s policy tightening path.

Elsewhere, crude oil prices fell, likely a result of the FOMC rate decision and its potential impact on economic growth. Still, gasoline prices around the globe remain at or near record-high levels. A surprise build in US crude oil stocks was another headwind to prices. US crude oil stocks rose by nearly 2 million barrels for the week ending June 10, according to the Energy Information Administration (EIA). Analysts expected a draw of 1.3 million barrels.

Events to watch in today’s APAC session:

  • Japan Trade Balance (May)
  • Australian Jobs Data (May)
  • China House Price Index (May)

NZD/USD technical forecast

NZD/USD is testing its 23.6% Fibonacci retracement level after an intraday move trimmed strength above the Fib overnight. A clean break higher would then have prices approaching the 38.2% Fib. Alternatively, a move lower would open a path for prices to set fresh yearly lows. The Relative Strength Index (RSI) managed to recover before entering oversold territory.

NZD/USD daily chart

Source: TradingView

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This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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