NZD/USD trades near the weekly high (0.5770) as the US Dollar weakens against all of its major counterparts, but the exchange rate may struggle to retain the advance from earlier this month if it fails to clear the opening range for October.
At the same time, the update to the US Personal Consumption Expenditure (PCE) Price Index may drag on NZD/USD as the core rate, the Federal Reserve’s preferred gauge for inflation, is expected to increase to 5.2% in September from 4.9% per annum the month prior, and evidence of persistent price growth may curb the recent recovery in the exchange rate as Chairman Jerome Powell and Co. pursue a restrictive policy.
NZD/USD Rate Daily Chart
Source: Trading View
NZD/USD may attempt to test the 50-Day SMA (0.5879) for the first time since August if it clear the monthly high (0.5814), with a move above the moving average opening up the Fibonacci overlap around 0.5900 (78.6% retracement) to 0.5930 (78.6% expansion).
However, NZD/USD may continue to track the negative slope in the moving average amid the lack of momentum to close above the overlap around 0.5740 (78.6% retracement) to 0.5790 (61.8% retracement), and the exchange rate may struggle to retain the advance from earlier this month if it fails to clear the October high (0.5814).
In turn, NZD/USD may range bound conditions, with a move below 0.5640 (161.8% expansion) bringing the yearly low (0.5512) back on the radar.
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--- Written by David Song, Currency Strategist
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