NZD/USD Price Analysis: 0.6135/38.2% Fibo. holds the key for bulls ahead of Fed’s Powell

• NZD/USD seesaws between tepid gains/minor losses through the early European session.
• A modest USD strength caps the upside amid worries about a global economic slowdown.
• The downside seems limited ahead of Fed Chair Jerome Powell’s congressional testimony.

The NZD/USD pair struggles to capitalize on its modest intraday gains and seesaws between tepid gains/minor losses through the first half of the European session on Wednesday. Spot prices currently trade around the 0.6165 region, nearly unchanged for the day, and remain well within the striking distance of a one-week low touched on Tuesday.

The Federal Reserve's (Fed) hawkish outlook, signalling that borrowing costs may still need to rise as much as 50 bps this year, acts as a tailwind for the US Dollar (USD), which, in turn, is seen as capping the upside for the NZD/USD pair. Apart from this, worries about a global economic slowdown further benefits the Greenback's safe-haven status and undermines the risk-sensitive Kiwi. The downside, however, remains cushioned, at least for the time being, as traders keenly await the Fed Chair Jerome Powell's semi-annual congressional testimony before placing fresh directional bets.

From a technical perspective, the NZD/USD pair on Tuesday found some support near the 38.2% Fibonacci retracement level of the downfall witnessed in May. The subsequent recovery, however, falters near 50% Fibo. level. This, along with the recent failure to find acceptance above a confluence comprising the 200-day Exponential Moving Average (EMA) and the 61.8% Fibo. level favours bearish traders. That said, neutral oscillators on the daily chart make it prudent to wait for some follow-through selling below the overnight swing low, around the 0.6135 region, before placing fresh bearish bets.

The NZD/USD pair might then turn vulnerable to weaken further below the 0.6100 round-figure mark and test the 23.6% Fibo. level, around the 0.6080-0.6075 region. Failure to defend the said support levels will expose the YTD low - levels just below the 0.6000 psychological mark - touched on May 31. Spot prices could extend the downward trajectory further towards testing the next relevant support near the 0.5945-0.5940 zone.

On the flip side, the daily swing high, around the 0.6185 region, which coincides with the 50% Fibo. level, now seems to act as an immediate hurdle ahead of the 0.6200 mark. Any subsequent move up might continue to confront stiff resistance and remain capped near the 0.6230 confluence. That said, a sustained strength beyond the 0.6245-0.6250 area, or the monthly top touched last week, will negate the bearish bias and pave the way for some meaningful upside for the NZD/USD pair.

NZD/USD daily chart

Key levels to watch