. NZD/USD Technical Analysis: Key Levels and PCE Data Focus

NZD/USD Technical Analysis: Key Levels and PCE Data Focus

31 May 2024

NZD/USD rises above 0.6100, with a focus on US Core PCE data

FUNDAMENTAL OVERVIEW:

  • NZD/USD pauses its losing streak ahead of the US Core PCE release.
  • The New Zealand Dollar may encounter challenges as the 10-year government bond yield dips below 4.85%.
  • Hawkish comments from Fed officials have supported the US Dollar’s stability.

After three days of losses, the New Zealand Dollar (NZD) found some footing on Friday. It’s currently trading around 0.6130 in the European session. However, a potential headwind emerged as the yield on New Zealand’s 10-year government bond dipped below 4.85%, falling back from its highest point in a month.

The Reserve Bank of New Zealand (RBNZ) is taking a more cautious approach to interest rates. They recently increased their prediction for how high rates will need to go and pushed back on when they might start to lower them. The RBNZ chose to hold rates at a 15-year high, signaling a need to keep borrowing costs tight for a longer period to bring inflation under control.

On Thursday, New Zealand Finance Minister Nicola Willis announced that the Treasury forecasts inflation to drop below 3% in Q3 and to reach around 2% by 2026. According to the official transcript on the New Zealand Government’s website, the Treasury also predicts a GDP contraction in the first half of 2024, followed by growth in the second half.

Investors are anticipating the release of the Federal Reserve’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, on Friday. If the data continues to show a decline, it could revive discussions about potential rate cuts in September, potentially weakening the US Dollar and supporting the NZD/USD pair.

NZD/USD TECHNICAL ANALYSIS DAILY CHART:

Technical Overview:

NZD/USD is trading within an up channel.

NZD/USD is moving above all the Moving Averages (SMA).

The Relative Strength Index (RSI) is in the Buying zone, while the Stochastic oscillator suggests a Positive trend.

Immediate Resistance level: 0.6160

Immediate support level: 0.6127

HOW TO TRADE NZD/USD

After declining, NZD/USD formed a support level and created a double bottom, leading to an upward movement. The price began rising, forming higher highs and is currently trading around a resistance level. If this level is broken, further upside is likely.

TRADE SUGGESTION- STOP BUY– 0.6166, TAKE PROFIT AT- 0.6216, SL AT- 0.6137.