Nzd On Backfoot After Fedspeak

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Nzd On Backfoot After Fedspeak

New Zealand Dollar (NZD) On Backfoot After Fedspeak

The global economic outlook isn't looking great after the recent comments by the Fed chair. In addition, the data from China is also weak as of late, which is putting pressure on the New Zealand Dollar (NZD).

The bigger picture is that the greenback is outperforming the NZD, which is the reason behind the NZD/USD decline. Especially, the comments from Jerome Powell hint at more rate hikes, which is bullish for the US Dollar.

To say that the markets were surprised by the Fed's comments would be an understatement. Most of the market players were thinking that the Fed is done with rate hikes, but it appears that's not the case at all.

US Dollar To Attract Foreign Inflows

The Fed chair commented on how the USD will receive capital inflows from foreign sources on account of higher interest rates. In simple words, foreign fund inflows will boost the greenback against other currencies.

After the Fedspeak, the NZD/USD turned its course and started trading lower. The decline in the Kiwi pair was so fast that it even crossed the dynamic resistance of the 50 SMA (daily chart). So now, the pair is trading below the 50 SMA, which is now acting as resistance.

The sudden selling in the NZD/USD has also put the recent bullish trend at risk. For now, NZD/USD trades near 0.5890 and is only slightly higher than 0.5874, which was the high of 2nd November. Any break below that level will lead to a full-scale reversal, which will further increase the losses.

According to analysts, the next target for the NZD/USD is 0.5862, followed by 0.5790. However, it will be too soon to assume that the NZD/USD has officially entered into the bearish territory.

On the upside, a break of the 0.60001 level (high of 3rd November) will be needed to establish the dominance of the bulls. If this happens, the next target for the Kiwi bulls will be 0.6055.

The long-term as well as the medium-term trend of NZD/USD is now bearish, which suggests that the bias is geared towards the downside.

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