The New Zealand dollar is expected to be affected by upcoming US PCE data. Price setups for NZD/USD, AUD/NZD, and GBP/NZD are also being discussed
Due to diverging monetary policy outlooks, the New Zealand dollar is exhibiting a weak bias against most of its peers. This is expected to persist until the release of the key US PCE price data on Friday.
In the academic context, the Reserve Bank of New Zealand (RBNZ) indicated in the previous month that New Zealand interest rates have reached their highest point. However, central banks in major currency regions continue to maintain a hawkish stance. This difference in monetary policy perspectives has had a negative impact on the New Zealand Dollar (NZD) recently. Presently, the primary focus is on the United States Personal Consumption Expenditures (PCE) data and the upcoming speech by Jerome Powell, Chair of the Federal Reserve. It is unlikely that Powell will provide any significant new information, as his testimony from last week did not reveal much insight.
It is predicted that the US Core PCE Price index did not change in May, remaining at 4.7% on a yearly basis. However, it is likely to have slightly decreased on a monthly basis to 0.3% from 0.4%. The Headline PCE Price Index is anticipated to be 3.8% on a yearly basis, in comparison to the April figure of 4.4%. If the monthly data aligns with or falls below expectations, it may negatively impact the US dollar, which experienced significant appreciation last week.
Meanwhile, Powell is scheduled to attend the European Central Bank Forum, where his speech may bear similarities to his testimony given last week. Joining him at the forum will be Bank of England Governor Andrew Bailey, European Central Bank President Christine Lagarde, and Bank of Japan Governor Kazuo Ueda. Given the persistently high inflation, it is expected that Powell will continue to emphasize a hawkish stance. Additionally, he may reiterate his previous message from last week that interest rates could potentially increase at a cautious rate.
NZD/USD Daily Chart
NZD/USD: Guided lower by a declining channel
In terms of technical analysis, the NZD/USD currency pair has been experiencing a downward trend as indicated by a declining pitchfork channel that began in April. To validate the possibility of a rebound observed in early June, it is crucial for NZD/USD to maintain a position above immediate support on a horizontal trendline that dates back to March, which is approximately at 0.6100. If this support level is breached, it would increase the likelihood of a decline towards the low point observed in May at 0.6000. Conversely, to confirm a range-bound perspective, it is necessary for there to be a significant breakthrough above the upper boundary of the pitchfork channel. When considering the broader context, it is imperative for NZD/USD to surpass the high point observed in May at 0.6385 in order for the overall bearish trend to reverse.
AUD/NZD Daily Chart
AUD/NZD: Back within the range
The AUD/USD currency pair has experienced a significant decline after reaching a strong resistance level at the February high of 1.1085. While the overall trend still indicates an upward movement, it is necessary for the exchange rate to surpass the 1.1085 level in order for a positive medium-term outlook to be established. In the meantime, it is expected that the currency pair will continue trading within the established range of 1.0600-1.1100.
GBP/NZD Monthly Chart
GBP/NZD: No sign of reversal of the uptrend
In the academic context, it appears that the GBP/NZD currency pair is experiencing overbought conditions as it tries to surpass the resistance level at 2.0735, which was last seen in early June. Nevertheless, there is no indication of a reversal in the current upward trend. Since momentum on longer timeframes remains positive, it is possible that the currency pair may reach its highest point of 2020 at 2.1085. To diminish the immediate upward pressure, the GBP/NZD cross would need to drop below the low point of mid-June, which stands at 2.0340.
