NZD/USD defends post-Fed gains with eyes on 0.6300, US GDP

• NZD/USD grinds higher following the biggest run-up in a week.
• New Zealand’s ANZ data came in mixed, recession fears test Kiwi pair buyers.
• Fed’s Powell triggered net neutrality chatters, drowned USD despite 0.75% rate hike.
• Flash readings of the US Q2 GDP, risk catalysts will be important to watch.

NZD/USD remains sidelined around 0.6260-70 heading into Thursday‘s European session, after rising the most in a week.

Alike other currency major pairs, the Kiwi pair also cheered the Fed-inspired USD weakness before the fears of recession and pre-data anxiety challenges the bulls. Additionally, mixed sentiment data from New Zealand also played a role to restrict the pair’s latest moves.

That said, New Zealand ANZ Activity Outlook for July improved to -8.7% versus -9.1% prior but the Business Confidence dropped below -55 expected to -56.7, versus -62.6 prior. “ANZ said in a note that businesses were well aware the Reserve Bank is on a mission to reduce customer demand to curb inflation so it was no surprise they were feeling apprehensive,” reported Reuters following the data release.

Elsewhere, the market’s reassessments of Fed Chairman Jerome Powell’s signals for net neutrality and an intact inversion of the US 2-year and 10-year Treasury yields, which in turn suggest recession, seem to have weighed on the risk appetite and the NZD/USD prices. Further, the cautious mood ahead of the virtual meeting between US President Joe Biden and China President Xi Jinping, as well as the flash readings of the US Q2 Gross Domestic Product (GDP) Annualized, expected 0.4% versus -1.6% prior, challenge NZD/USD buyers.

However, the US dollar’s downbeat performance due to the Fed’s hints of a slowdown in the rate hike cycle, as well as chatters surrounding the US economic weakness, appeared to have kept the NZD/USD buyers hopeful.

Also read: US GDP Preview: Win-win for the dollar? Economy's flirt with recession to boost the buck

Technical analysis

A 110-pip area between the 50-DMA and 21-DMA, respectively around 0.6310 and 0.6200, restricts short-term NZD/USD moves.