NZD/USD challenges 20-day SMA at the end of the week

• The NZD/USD rose to its highest level since late May, above the 20-day SMA at 0.6130.
• ANZ predicts next week New Zealand GDP data will come in mixed.
• NZD/USD to close a second consecutive week of gains.

The NZD/USD currency pair has recently surged to its highest level since May, surpassing the 20-day Simple Moving Average (SMA) at 0.6130. The Greenback’s losses for the next sessions could be limited by hawkish bets for the upcoming Federal Reserve (Fed) meeting past June, as recent development made investors foresee fewer odds of a rate cut by year-end.

Fed expectations remain steady for next week, but later rate cut bets decrease

Ahead of the upcoming Federal Reserve (Fed) June 13-14 meeting, the CME FedWatch Tool suggests that investors are placing higher probabilities on the Fed refraining from hiking rates and, instead, keeping the target rate steady at 5.00%-5.25%. However, the bets for a hike in July stand almost priced in at 85% and the odds of a rate cut by years-end decreased from 50% at the start of the week to nearly 15% due to the recent unexpected hikes by the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC). In that sense, a more hawkish stance by the Fed provides support for the USD.

On the other hand, following NZ Q1 Gross Domestic Product (GDP) data release, ANZ Bank is expecting next week to see “tepid” growth and an improvement from the current account deficit. 

NZD/USD levels to watch

Technically speaking, the NZD/USD exchange rate holds a neutral to bullish outlook for the short term as daily indicators show that bulls continue to get momentum. However, the pair needs to consolidate above the 20-day SMA in order to confirm a recovery. On the weekly chart, the pair is poised to confirm a second consecutive week of gains.

A consolidation above the 20-day Simple Moving Average at 0.6130 would suggest a continuation of the momentum towards the 200-day SMA at 0.6150 and then to the 0.6200 area. On the other hand, the 0.6090 area is the immediate support level for NZD/USD. A break below could pave the way towards the 0.6050 and 0.6030 zones.

NZD/USD daily chart