The New Zealand Dollar is trading lower early Tuesday, continuing this week’s bearish theme. The focus this week has primarily been on the widening interest rate differential between U.S. Government bonds and New Zealand Government bonds.
Last week, the U.S. Dollar lost ground against the New Zealand Dollar after Federal Reserve Chairman Jerome Powell opened the door for a sooner-than-expected rate cut. This week, higher Treasury yields and increased demand for risk have been pressuring the Kiwi.
On Tuesday, U.S. producer price data came in as expected, increasing solidly for a second straight month in May. The data pointed to a steady pickup in underlying inflation pressures, reducing the chances of a Fed rate cut next week.
At 05:02 GMT, the NZD/USD is trading .6570, down 0.0013 or -0.20%.
Daily Technical Analysis
The main trend is up according to the daily swing chart. A trade through .6682 will signal a resumption of the uptrend. The main trend will change to down on a trade through .6495.
The short-term range is .6481 to .6682. The market is currently testing its retracement zone at .6581 to .6558. Trader reaction to this zone will determine the short-term direction of the Forex pair.
Since the trend is up, buyers could step in on a test of the short-term retracement zone. They will be trying to produce another secondary bottom in an effort to keep the upside bias intact. Lower Treasury yields could help them accomplish this.
Daily Technical Forecast
Based on the early price action, the direction of the NZD/USD on Wednesday is likely to be determined by trader reaction to the short-term 50% level at .6581.
A sustained move over .6581 will indicate the presence of buyers. If this move creates enough upside momentum then look for a drive into the uptrending Gann angle at .6621. Overcoming this angle could lead to a test of the downtrending Gann angle at .6644.
A sustained move under .6581 will signal the presence of sellers. The next downside target is the short-term Fibonacci level at .6558, followed closely by an uptrending Gann angle at .6551. This level is the trigger point for an acceleration into the next uptrending Gann angle at .6516. This is the last potential support angle before the .6495 and .6481 main bottoms.
Pressuring the NZD/USD early Wednesday is the weaker-than-expected Visitor Arrivals report. Later today at 12:30 GMT, the U.S. CPI report could be a market-moving event.