NZD/USD struggles near 0.6500 and retraces towards 0.6460s, despite a risk-on mood

• The NZD/USD retraces from weekly highs at 0.6518, although the RBNZ hiked rates on Wednesday.
• Fed minutes confirmed that all participants agreed to 50 bps increases for the June and July meetings.
• NZD/USD Price Forecast: A “bearish-harami” in the daily chart looms, once confirmed, might pave the way for a re-test of the 20-DMA at 0.6385.

The NZD/USD runs to resistance and fails to extend Wednesday’s gains after the Reserve Bank of New Zealand (RBNZ) hiked rates by 0.50%, lifting the Overnight Cash Rates (OCR) to 2%. At 0.6460, the NZD/USD is retracing from weekly highs above 0.6500, despite an upbeat market mood.

Global equities are rising, depicting a positive market sentiment. In the FX complex, the mood is mixed as the gainers fluctuate between safe-haven peers and risk-sensitive currencies. The New Zealand dollar is the weakest currency as the North American session begins, with no fundamental reason supporting the move.

In the meantime, the US Dollar Index, a gauge of the greenback’s value against a basket of peers, is losing traction and is back beneath the 102.000 mark, down 0.12% at 101.956. At the same time, US Treasury yields, led by the 10-year benchmark note, is flat, sitting at 2.754%, a reflection of market players backpedaling an aggressive Fed, as preliminary readings of the US GDP Q1 for 2022 reported a contraction of 1.5% YoY.

Additionally, the US Department of Labor reported that Initial Jobless Claims for the week ending on May 20 fell to 210K against a 215K expectations.

On Wednesday, the US Federal Reserve’s Open Market Committee released the May meeting minutes, which delivered already known news, though confirmed policymakers’ stance of raising rates by 50 bps on each of its June and July meetings. Furthermore, the Fed agreed that they needed to move “expeditiously” to a neutral posture and that a “restrictive” approach was appropriate. Also added that some members emphasized that they were and will be focused on inflationary pressures and noted that prices are skewed to the upside.

For the remainder of the week, the NZ docket would feature the ANZ Roy Morgan Consumer Confidence for May, foreseen at 83. On the US front, the Personal Consumption Expenditure (PCE) is widely expected, as it’s the Federal Reserve’s favorite gauge of inflation.

NZD/USD Price Forecast: Technical outlook

The NZD/USD daily chart shows that the pair remains downwards, despite that NZD/USD buyers lifted the major above the 20-day moving average (DMA) on May 23, a signal that consolidated the pair. However, failure to trade above 0.6568 would not shift the bias to neutral-downwards and even could expose the NZD/USD to further selling pressure, as it is forming a “bearish-harami” pattern.

If the latter scenario plays out, the NZD/USD first support would be the May 25 swing low at 0.6417. A break below would expose the May 19 cycle low at 0.6290, followed by the YTD low at 0.6145. Otherwise, if NZD/USD bulls push the exchange rate above 0.6568, that would open the door for further gains, though the major would face some supply zones. The NZD/USD’s first resistance would be the 50-DMA at 0.6647. Once cleared, the immediate supply level would be the 100-DMA at 0.6688, followed by April 20 swing high at 0.6813.

Key Technival Levels