- NZD/USD remains depressed near six-week low after two-week downtrend.
- US dollar remains bid amid uncertainty over Fed’s next move, upbeat US data.
- Off in China, Australia signal a choppy session but cautious sentiment can back the bears.
NZD/USD extends Friday’s grim outlook to early Monday morning in Asia, despite recent wobbling around 0.7730. The kiwi pair bears the burden of a strong US dollar amid the market’s rush to risk safety ahead of this week’s Federal Open Market Committee (FOMC).
Following strong inflation figures, a better-than-forecast Michigan Consumer Confidence Index from the US, 86.4 in June from 82.9 previously, propelled the greenback versus most of its counterparts on Friday.
Also favoring the US currency, also weighing on the New Zealand dollar (NZD), could be the updates from the Group of Seven (G7) meeting which criticized China. “The G7 singled out China in their communique for human rights in Xinjiang, demanded freedoms and a high degree of autonomy for Hong Kong, and said a full investigation was needed into the origins of the novel coronavirus. The Group of Seven rich nations promised to tackle China’s growing influence, fight climate change, get more COVID-19 jabs to poor countries and keep up their economic stimulus programs at their first summit since Joe Biden became US President,” said Reuters.
It’s worth noting that upbeat prints of Business NZ Manufacturing Index, 58.6 versus 58.3, for May also couldn’t help the NZD/USD prices, neither mildly positive stock markets.
Above all, indecision over the Fed’s next moves, as well as the RBNZ’s refrain from providing clear signals, keep NZD/USD on the back foot.
Against this backdrop, US bond yields corrected a bit while S&P 500 refreshed record top.
Moving on, New Zealand’s Business NZ PSI for May, prior 61.2, may offer intermediate moves amid a likely inactive day due to the extended weekend in major trading partners, namely Australia and China.
NZD/USD sellers attack the key support line, stretched from October 2020 around 0.7110, following the second weekly downside. With the downward sloping RSI and Momentum indicators joining bearish MACD, the kiwi pair is likely to break the crucial support, which in turn could quickly fetch the quote to the 0.7100 round-figure and then to early April lows close to 0.7070. Meanwhile, a downward sloping trend line from late May joins 50-day and 100-day SMA around 0.7080-90 to restrict the pair’s short-term upside.