NZD/USD marches toward 0.6500 with eyes on New Zealand inflation, US Q4 GDP

• NZD/USD renews intraday high as it extends the previous two-week uptrend.
• Firmer sentiment, mixed concerns surrounding Fed weigh on the US Dollar.
• Pre-Fed blackout, China-linked holidays could restrict market moves.
• Q 4 details of New Zealand CPI and US GDP will be crucial for near-term directions.

NZD/USD takes the bids to refresh intraday high near 0.6490 as the US Dollar remains on the back foot amid cautious optimism in the market, as well as due to the absence of Federal Reserve (Fed) policymakers’ speech during this week. It’s worth noting that the Chinese Lunar New Year holidays restrict the Kiwi pair’s run-up while hopes of having a strong contestant to replace Jacinda Ardern as New Zealand’s (NZ) Prime Minister (PM) seem to favor the pair buyers.

That said, the Fed officials were hawkish ahead of the two-week-long pre-FOMC (Federal Open Market Committee) blackout period. Federal Reserve Governor Christopher Waller was the last from the US central bank speakers to cross the wires as he said, “He favors a 25 basis point rate hike at the upcoming meeting and continued policy tightening beyond that.”

It should be noted that the downbeat US data and easing inflation woes underpinned the market’s expectations of softer rate hikes from the Fed, as well as the nearness to the policy pivot, which in turn weighed on the US Dollar Index (DXY). That said, the greenback’s gauge versus the six major currencies dropped during the last two consecutive weeks.

Elsewhere, NZ PM Jacinda Ardern has already announced her departure and hence the government is on the run to find a suitable candidate who matches Ardern’s political aura. As per the latest update from Reuters, the ruling Labour Party chose former COVID minister Chris Hipkins on Sunday to replace the charismatic Jacinda Ardern as its new leader, and become the next prime minister of the country.

Hence, softer USD and political optimism at home could allow the Kiwi pair to remain firmer. However, a one-week-long Lunar New Year holiday in China might limit the NZD/USD pair’s immediate moves. Also likely to challenge the quote’s upside could be the cautious mood ahead of the fourth quarter (Q4) US Gross Domestic Product (GDP) and NZ Consumer Price Index (CPI) details.

Given the mixed consensus and receding hawkish bias towards the Fed, as well as the Reserve Bank of New Zealand (RBNZ), the NZD/USD is likely to extend the latest grinding towards the north.

Technical analysis

A six-week-old ascending triangle restricts immediate NZD/USD moves between 0.6425 and 0.6530. However, the RSI and MACD conditions suggest that the bulls are running out of steam of late.