NZD/USD flat on Friday, clinging weekly gains

NZD/USD traded neutral at the 0.6230 area on Friday but set a 1.70% weekly gain.
Hawkish Fed speakers and upbeat UoM data gave the USD momentum.
Rising US bond yields limited the Greenback’s traction.

The NZD/USD traded stable at the 0.6210 – 0.6245 range at the end of the week, holding to a 170 pip weekly gain. In that sense, hawkish Federal Reserve (Fed) speakers lifted the US bond yields while upbeat consumer confidence data from the University of Michigan gave the Greenback an additional boost. On the NZD’s side, now relevant economic data was released, and the Kiwi’s gains seem to be capped by the confirmation of New Zealand’s economy entering a recession following Gross Domestic Product (GDP) on Wednesday.

US bond yields made the US Dollar hold its ground

On Wednesday, Fed Chair Powell stated that a rate-hike pause was needed in order to assess additional information and its implications on monetary policy, while the dot plots showed that members foresee an additional 50 basis points tightening for the rest of 2023. In that sense, as stocks rallied through Thursday, investors seemed not to believe the Fed, so speakers were today on the wires supporting the hawkish case.

That being said, Fed’s Christopher Waller expressed his concerns regarding the limited advancement in core inflation and indicated the potential need for additional hikes. Later, Fed Thomas Barkin stated that he is open to taking further action if the data justifies it. As a reaction, shorter-term bond yields rose across the board on Friday. The 10-year bond yield rose to 3.76%, while the 2-year yield increased to 4.73% and the 5-year to 4.00%, respectively, with the 2-year rate leading the way showing a 2% increase and giving support to the USD.

In addition, the University of Michigan (UoM) released its Consumer Sentiment Index for June, which exceeded predictions, reaching 63.9. This indicates a rise in consumer confidence compared to the previous reading of 59.2. Furthermore, the five-year Consumer Inflation Expectation declined from the expected 3.1% to 3%, with these encouraging figures also contributing to the Greenback holding its ground.

NZD/USD Levels to watch

Both the weekly and daily chart suggest a bullish outlook for the NZD. On the weekly chart, the pair consolidates a third-consecutive advance.Out of the last seven days, the Kiwi tallied gains in six of them. In addition, both the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) suggest that the buyers have the upperhand.

In case of correcting to the downside, immediate support is seen at the 100-day Simple Moving Average (SMA) at 0.6218 followed by the 0.6200 psychological mark and the 200-day SMA at 0.6150. On the other hand, resistances line up at 0.6250 followed by 0.6300 (May 12 high) and the 0.62320 area.