NZD/USD Price Analysis: Get set for a volatility expansion

• A volatility contraction continues in NZD/USD ahead of the US PCE Price Index data.
• The Kiwi asset is displaying topsy-turvy moves in an Ascending Triangle formation.
• The USD Index failed to capitalize on upbeat US economic data as the odds of Fed's smaller rate hike are still solid.

The struggle of the NZD/USD pair to shift its business above the psychological resistance of 0.6500 continues as the US Dollar Index (DXY) has confidently defended itself from refreshing its seven-month low after the release of the upbeat United States economic data. The Kiwi asset is back inside the woods and is expected to display back-and-forth action till the release of the US Personal Consumption Expenditure (PCE) Price Index (Dec) data.

Meanwhile, the risk profile is favorable as S&P500 ended with significant gains. The US Dollar Index trimmed to 101.40 after a responsive buying action as the odds of a small interest rate hike by the Federal Reserve (Fed) are extremely solid.

On an hourly scale, NZD/USD is displaying topsy-turvy action in an Ascending Triangle chart pattern that indicates volatility contraction. The New Zealand Dollar sensed demand after dropping to near the upward-sloping trendline plotted from January 19 low at 0.6365 while the horizontal resistance is placed from January 18 high at 0.6531.

The 20-EMA at 0.6483 is overlapping the Kiwi asset, which indicates consolidation ahead.

Also, the Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which indicates an absence of a potential trigger for a decisive move.

For an upside move, the asset needs to surpass Wednesday’s high at 0.6530, which will drive the asset toward June 3 high at 0.6576. A breach of the latter will expose the asset to the round-level resistance at 0.6600.

On the flip side, a breakdown below January 16 high at 0.6426 will drag the Kiwi asset toward January 17 low at 0.6366 followed by January 12 low around 0.6300.

NZD/USD hourly chart