NZD/USD consolidates above the 200-day SMA post-US CPI

• The NZD/USD jumped to 0.6177 and holds above the 200-day SMA.
• US CPI decelerated in May, and investors now fully price in a hike pause on Wednesday by the Fed.
• Eyes on Fed decision, FOMC macro forecasts and dot plots.

In Tuesday’s session, the NZD/USD managed to jump above the 200-day to a high of 0.6177 but retreated to 0.6145 as the US Dollar lost strength following the release of the May Consumer Price Index (CPI). As the data came in below expectations, market participants are fully discounting that the Federal Reserve will not raise interest rates on Wednesday. 

Investor’s assessment of US CPI weakened the US Dollar

The US Bureau of Labor Statistics released the Consumer Price Index (CPI) for May, which fell slightly below expectations. The headline figure declined to 4% YoY, compared to the expected 4.1%, while the Core measure matched expectations at 5.3% YoY. The monthly measures from both the CPI and Core CPI rose by 0.1% and 0.4%, respectively.

Following the release of the data, markets have fully priced a pause at the upcoming Federal Reserve meeting on Wednesday, which seems to be weakening the Greenback. Attention now turns to clues on forward guidance. The CME FedWatch Tool suggests that investors are betting on a 63% probability of a rate hike in July.

In addition, the release of updated macroeconomic forecasts and dot plots from the Federal Open Market Committee (FOMC) will also contribute to the shaping of expectations of future Fed meetings.

NZD/USD Levels to watch

According to the daily chart, the technical outlook of the NZD/USD has turned bullish for the short term as indicators jumped to positive territory, suggesting that the buyers now have the upper hand. The Relative Strength Index (RSI) jumped above its midline while the Moving Average Convergence Divergence (MACD) prints rising green bars. However, the bearish cross performed between the 20 and 200-day SMA’s may limit the NZD/USD upside’s potential in the following sessions. 

On the upside, resistance levels can be found at the daily highs around 0.6177, followed by the 0.6200 psychological mark and the 100-day Simple Moving Average (SMA) near 0.6220. On the other hand, supports line up at the 200-day SMA at 0.6150 (former resistance) and below at the 20-day SMA at 0.6120 and the 0.6100 zone.

NZD/USD Daily chart