NZD/USD retreats towards 0.6300 on weaker New Zealand trade balance, Fed’s Powell in focus

  • NZD/USD justifies Tuesday’s Doji formation to pare weekly gains and reconnect with recent intraday lows.
  • New Zealand’s trade balance widens in May as both exports and imports rise from earlier revised values.
  • Cautious sentiment ahead of Fed Chairman Powell’s testimony appears to be weighing on the previously upbeat mood.
  • Credit card spending in New Zealand for the month of May could offer some immediate guidance.

NZD/USD refreshes its intraday low around 0.6320 as traders consolidate recent gains following negative trade data from New Zealand (NZ) in Wednesday’s Asian session. Market anxiety ahead of key testimony from Fed Chairman Jerome Powell is also putting downward pressure on the Kiwi pair.

New Zealand’s trade balance fell to MoM$263m from $440m previously (revised from $584m). Further details suggest that exports and imports hit $6.95 billion and $6.69 billion, respectively, from the lower-revised $6.16 billion and $5.72 billion in that order.

In addition to trade data from New Zealand, slight losses in S&P 500 futures and two basis points (bps) of a decline in 10-year US Treasury yields also illustrate the market’s cautious mood and weigh on NZD/USD prices.

That said, the Kiwi pair has risen over the past couple of days amid receding US recession fears, primarily propelled by US President Joe Biden and Treasury Secretary Janet Yellen. Wall Street’s jump after posting the biggest weekly loss in two years also favored NZD/USD buyers.

Additionally, bearish US data bolstered the Kiwi pair as US existing home sales fell to their lowest levels in two years when looking at the annualized number. Along the same line, the Chicago Fed National Activity Index also fell to 0.01 in May from a downward revision of 0.04 previously.

It should be noted that the hawkish Fedspeak probed NZD/USD bulls. On Tuesday, Richmond Federal Reserve Chairman Thomas Barkin said there would be no quick return for the U.S. economy to the previous decade’s experience of stable growth, jobs and economic growth. inflation, Reuters reported.

In summary, the NZD/USD pair depicts market anxiety as Fed Chairman Powell faces the difficult task of justifying the biggest rate hike since 1994 while balancing growth optimism. In the immediate term, credit card spending in New Zealand for the month of May, expected at 2.0% vs. 1.1% previously, will be important to watch.

Technical analysis

Tuesday’s Doji formation, along with sustained trading below the 21-day EMA level of 0.6380, gives NZD/USD sellers hope for a yearly low around 0.6200.


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