NZD/USD reaches a two-week high around 0.6490s but retreats towards 0.6450s on upbeat sentiment

• NZD/USD begins the week with gains of almost 1%.
• The greenback remains under pressure on growing concerns that an aggressive Fed would cause a recession in the US.
• NZD/USD Price Forecast: Failure to reclaim 0.6500, and the RSI shifting downwards to tumble the major towards 0.6300.

The New Zealand dollar advances for the third straight day and begins the week on a higher tone, benefitted by a positive market mood, reflected by global equities finishing Monday’s session with gains. At the time of writing, the NZD/USD is trading at 0.6459.

Sentiment remains upbeat; the US dollar edges down

Wall Street finished Monday’s session with gains, further confirming risk appetite. The greenback trades softer, with the US Dollar Index tumbling close to 1% in the day and hovering around 102.074, a tailwind for the NZD/USD. Nevertheless, rising US Treasury yields, led by the 10-year benchmark note up 7.5 basis points, sitting at 2.860%, caped the rise of the NZD.

The buck remains on the defensive, on growing concerns that a further aggressive Federal Reserve could trigger a recession in the US. The US central bank struggles to drag inflation from around 8% to its 2% target. Reports that the US may consider lifting some trade tariffs on China was a piece of news cheered by traders, which turned to equities and lifted the major global indices.

Aside from this, the NZD/USD opened near the daily pivot point at 0.6390 and never looked back, rallying close to 1%, reaching a daily high at 0.6491 on Monday. Nevertheless, the major retreated afterward around the 20-hour simple moving average (SMA) at 0.6465.

An absent New Zealand economic docket left NZD/USD traders focused on market sentiment and US macroeconomic data. The US docket featured the Chicago Fed National Activity Index for April, which rose by 0.47,  higher than the  0.36 of the previous reading.

Of late, Atlanta’s Federal Reserve President Raphael Bostic said that the quick response in financial markets to tighten monetary policy offers hope that other parts of the economy may adjust more quickly.

In the week ahead, the New Zealand economic docket will feature Retail Sales for the first quarter, followed by the Reserve Bank of New Zealand (RBNZ) Interest Rate Decision and Business and Consumer Sentiment surveys.

On the US front, S&P PMIs, New Home Sales for April, and the Federal Reserve Chair Jerome Powell would be featured.

NZD/USD Price Forecast: Technical outlook

The NZD/USD is still downward biased, albeit starting the week with an almost 1% gain. The majority of the daily moving averages (DMAs) reside above the exchange rate, except for the 20-DMA at 0.6390, which tracks the trend in the near term. It’s worth noting that the Relative Strength Index (RSI) slope turned horizontally below the 50-midline at 49.19, which leaves the pair vulnerable to further selling pressure.

Therefore, the major could resume the downtrend before the RBNZ monetary policy meeting.

That said, the NZD/USD first support would be the 20-DMA at 0.6390. Break below would expose the May 20 daily low at 0.6363, followed by the May 19 daily low at 0.6290.