NZD/USD, AUD/NZD, GBP/NZD - Outlook:
- Diverging monetary policy outlooks appears to be weighing on NZD.
- AUD/NZD turns lower from key resistance. GBP/NZD has run into a major hurdle.
- What are the levels to watch in select NZD crosses?
The New Zealand dollar is maintaining a weak bias against most of its peers ahead of the key US PCE price data due Friday, on diverging monetary policy outlooks.
The Reserve Bank of New Zealand (RBNZ) signalled last month that NZ interest rates are at their peak. In contrast, central banks within the major currency space remain hawkish. The divergence in monetary policy outlooks has weighed on NZD recently. Key focus is now US PCE data and US Fed Chair Jerome Powell’s speech later Wednesday, although the Fed chief is unlikely to shed much new light from his testimony last week.
US Core PCE Price index is forecast to have remained flat in May at 4.7% on the year but probably softened a bit on a monthly basis to 0.3% from 0.4%. Headline PCE Price Index is expected at 3.8% on year compared with 4.4% in April. If the on-month data is in line or lower than expectations, it could weigh on the US dollar which rose quite a bit last week.
Meanwhile, Powell is due at the European Central Bank Forum, which may not be much different from his testimony last week. He will be joined by Bank of England Governor Andrew Bailey, European Central Bank President Christine Lagarde, and Bank of Japan Governor Kazuo Ueda. Powell is likely to persist with the hawkish rhetoric given stubbornly high inflation. At the same time, he could reiterate his last week’s message that rates could rise at a careful pace.
NZD/USD Daily Chart
Chart Created Using TradingView
NZD/USD: Guided lower by a declining channel
On technical charts, NZD/USD has been guided lower by a declining pitchfork channel from April (see the daily chart). If the early-June rebound were for real, NZD/USD needs to hold above immediate support on a horizontal trendline from March at about 0.6100. Any break below would elevate the risk of a drop toward the May low of 0.6000. On the upside, a decisive break above the upper edge of the pitchfork channel is needed to confirm a range-bound view. Zooming out, a cross above the May high of 0.6385 is vital for the broader bearishness to reverse.
AUD/NZD Daily Chart
Chart Created Using TradingView
AUD/NZD: Back within the range
AUD/USD has retraced sharply from the tough ceiling at the February high of 1.1085 – a possibility highlighted in the previous update “New Zealand Dollar Boosted by Low Volatility; What’s Next for NZD/USD, AUD/NZD, EUR/NZD?”, published June 9. Although the broader bias still remains up, a break above 1.1085 is needed for the medium-term outlook to turn constructive. In the meantime, the cross looks set to remain in the well-established 1.0600-1.1100 band.
GBP/NZD Monthly Chart
Chart Created Using TradingView
GBP/NZD: No sign of reversal of the uptrend
GBP/NZD looks overbought as it attempts to break the immediate barrier at the early-June high of 2.0735. However, there is no sign of a reversal of the uptrend. Given that momentum on higher timeframes continues to be up, a move toward the 2020 high of 2.1085 can’t be ruled out. For the immediate upward pressure to fade, the cross needs to fall below the mid-June low of 2.0340.
--- Written by Manish Jaradi, Strategist for DailyFX.com
--- Contact and follow Jaradi on Twitter: @JaradiManish
