Baxia Markets
September 27, 2023

NZD/USD Slides Below 0.5950 Driven by USD Demand: What's Next?

market analysis header imageThe NZDUSD pair has been a subject of close scrutiny lately as economic factors from both New Zealand and the United States continue to influence its direction. Here's a closer look at what's been happening and what to watch out for in the coming days.


US Consumer Confidence and Economic Indicators:

In September, US Consumer Confidence saw a decline to 103.0 from August's 108.7, marking its lowest level in four months. This dip was largely attributed to the impact of rising interest rates. Meanwhile, economic indicators provided a mixed bag of results. Building Permits for August increased to 1.541 million from the previous month's 1.44 million. The House Price Index for July exceeded expectations by rising to 0.8% month-on-month, while August New Home Sales faced an -8.7% drop following July's 8% rise.


Federal Reserve's Stance:

The Federal Reserve held interest rates steady in its September meeting, maintaining the range of 5.25% to 5.50%. However, the hawkish stance from Minneapolis Federal Reserve Bank President Neel Kashkari hinted at one more rate hike this year. Kashkari emphasized that US rates may need to go higher and remain elevated for a longer duration to cool off certain aspects of the economy. This Fed policy direction is bolstering the US Dollar and presenting headwinds for the NZDUSD pair.


New Zealand Economic Indicators:

On the Kiwi front, the markets appear to have factored in a potential Official Cash Rate (OCR) hike by the Reserve Bank of New Zealand (RBNZ) by the end of 2023. This adjustment comes as the New Zealand economy demonstrates greater resilience than initially anticipated. However, New Zealand's Trade Balance for August showed a deficit of $-2,291 million, up from the previous month's $-1,107 million. On an annual basis, the trade deficit improved slightly to $15.54 billion.


Looking Ahead:

Moving forward, investors will closely monitor New Zealand's Business Confidence for September and ANZ Roy Morgan Consumer Confidence data. In the US, attention will shift to the Durable Goods Orders report. Market focus will then center around the Fed's preferred gauge of consumer inflation, the Core Personal Consumption Expenditure (PCE) Price Index, scheduled for release later. Analysts anticipate a decline in the annual rate from 4.2% to 3.9%. Traders will be on the lookout for potential trading opportunities in the NZDUSD pair based on the evolving economic landscape.


NZDUSD Technical Analysis

NZD/USD Slides Below 0.5950 Driven by USD Demand: What's Next?

In the recent hourly timeframe chart, the price tested the critical support zone between 0.5913 and 0.5903, forming a bullish candle with a long tail wick. However, despite this short-term rebound, NZD/USD remains under persistent bearish pressure. The Ichimoku indicator reveals a strong bearish trend, with the Chikou Span, Kijun Sen, and Tenkan Sen all situated below the Ichimoku cloud. Furthermore, the MACD signal line and MACD histogram remain below the zero line, further confirming the prevailing bearish sentiment. Additionally, the William's Percent R indicator, set with a period of 180, recently dipped briefly below -60, indicating bearish conditions.


Key Economic Calendar to Watch Today

New Zealand Monthly Consumer Price Index

Forecast 0.0% vs Previous 4.9%

US Durable Goods Orders(Aug) 

Forecast -0.5% vs Previous -5.2%

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