NZD/USD faces resistance around three-week highs, retreats to 0.6220s

• NZD/USD climbed towards 0.6270s but erased gains of 50 pips as sentiment dampened.
• US recession fears loom amongst investors as the housing market keeps cooling further.
• NZD/USD Price Analysis: The major faces solid resistance despite breaking upwards of a falling wedge.

On Wednesday,  the NZD/USD hit a new three-week high at 0.6272, but it is retreating as market sentiment shifted sour on news that Google would follow Apple’s path and might halt hiring for two weeks.

The NZD/USD opened near the session’s lows around 0.6220s but advanced firmly during the Asian and European sessions towards the weekly highs before tripping down, tumbling to the day’s low. At the time of writing, the NZD/USD is trading at 0.6224, barely up 0.05%.

The US housing market show signs of a slowdown

Recession fears could reignite due to worst than expected housing data. Earlier, US Existing Home Sales dropped to two-year lows levels and shrank by 5.4%, missing expectations of 5.4%. Although it is the fifth straight decline, higher interest rates might not stop the fall in the near term. Additionally, on Tuesday, Housing Starts and Building Permits acted as leading indicators for existing sales, contracting 2% and 0.6%, respectively.

In the meantime, the New Zealand economic docket reported the Global Dairy Trader Price Index at -5% vs. -4.1% the previous month, which NZD/USD traders mainly ignored.

Therefore, the NZD/USD outlook looks brighter for the greenback, even though US housing data shows contraction, which could be an optimistic scenario for the greenback. Why? Because the US dollar, throughout recessions, has risen. Additionally, commodity prices tend to drop through those periods due to falling demand, a headwind for the New Zealand dollar.

What to watch

The New Zealand docket will feature June’s Balance of Trade, alongside Imports and Exports. On the US front, the Philly Fed Manufacturing Index, Initial Jobless Claims, and the CB Leading Index.

NZD/USD Price Analysis: Technical outlook

From a technical perspective, the NZD/USD is downward biased, despite breaking a falling wedge, alongside trading above the 20-day EMA. Nevertheless, the NZD/USD price action is forming a gravestone doji preceded by an uptrend, meaning that sellers stepped in, putting a lid on prices, so the NZD/USD might consolidate in the near term.

The NZD/USD’s resistance levels would be July’s 20 high at 0.6272, followed by 0.6300, and then the 50-day EMA At 0.6314. On the flip side, the NZD/USD first support would be 0.6200. Break below will expose the 20-day EMA at 0.6195, followed by 0.6100.