NZD/USD grinds lower from weekly highs towards 0.6960, on risk-off and Fed speaking

• The NZD/USD drops from around 0.6970s as market mood dampened on Russia/Ukraine woes.
• The greenback remains firm, underpinned by Fed policymakers.
• Cleveland’s Fed President Mester adds her name to the Fed’s hawks list.
• NZD/USD Price Forecast: The break above the 200-DMA shifted the bias to upwards, though faces solid resistance around 0.7000.

The NZD/USD slides amid Wednesday’s downbeat market sentiment, courtesy of increasing tensions in the Russia-Ukraine conflict, which took the back seat at the beginning of the week, as the US central bank grabbed the attention after hiking rates and Fed speaking. At the time of writing, the NZD/USD is trading at 0.6960.

Reflection of the market mood is equities, with European and US stocks indices falling. In the FX space, the greenback advance as shown by the US Dollar Index, rising 0.35%, sitting at 98.760, while the 10-year benchmark note eases from weekly highs, down one basis point, down to 2.366%.

Russia – Ukraine war update

Ukraine’s President Zelensky said that talks with Russia are confrontational and complex. At the same time, the Russian Foreign Minister Lavrov commented that NATO’s eastward expansion continues irrespective of whether a particular nation is a member. Meanwhile, US President Joe Biden is expected to announce sanctions on more than 300 members of Russia’s lower chamber of Parliament on Thursday.

Fed officials parade continues

The US economic docket would feature more Fed speakers. Earlier, Fed Chief Powell talked about digital currencies, leaving monetary policy aside. Of late, Cleveland Fed President Loretta Mester has added her name to the list of hawks in the US central bank. On Wednesday, Mester said that the Fed would need to do some 50 bps moves this year while favoring frontloading rate hikes to better position themselves for however the US economy evolves. She further added that “I have no concerns that rate increases are going to push the US economy into recession.”

Aside from this, the US New Home Sales for February rose 0.772M  lower than the 0.81M estimated, a report mainly ignored by NZD/USD traders.

NZD/USD Price Forecast: Technical outlook

Tuesday’s price action showed that the NZD/USD pair broke above the 200-day moving average(DMA)at 0.6909, shifting the bias from neutral-upwards to upwards, however it faced strong resistance around the 0.6970 area, some pips short of the 0.7000 psychological level.

With the Relative Strength Index (RSI) a momentum indicator around 66, with some room before reaching overbought conditions, the NZD/USD might test the 0.7000 mark. If that scenario plays out, the NZD/USD first resistance would be 0.6974, followed by 0.7000, and then the downslope trendline of a descending channel around 0.7050-70 area.

On the flip side, the NZD/USD first support would be the 200-DMA at 0.6909. Breach of the latter would expose January 13 previous resistance-now-support at 0.6890, followed by February 23 daioly high resistance-now-support at 0.6809.