The NZD/USD pair is experiencing selling pressure as it tries to surpass the immediate resistance level of 0.6230 during the early New York session. The Kiwi asset is encountering challenges due to a recovery attempt by the US Dollar Index (DXY) ahead of the Federal Reserve’s (Fed) interest rate decision.
Market analysts at Danske Bank anticipate the Fed to raise interest rates by 25 basis points for the final time before adopting a wait-and-see approach.
Despite the economy holding up well, the decrease in underlying inflation and declining inflation expectations suggest limited necessity for further rate increases. The immediate market response is expected to be subdued, but there are potential risks for a hawkish reaction if Powell keeps the door open for another hike.
The USD Index has found support around 101.10 as investors hope for a hawkish guidance from Fed Powell. However, the S&P500 is projected to open negatively following weak cues from overnight futures.
On the daily scale, the NZD/USD is currently trading within the confines of an Ascending Triangle chart pattern, indicating reduced volatility. The horizontal resistance of this pattern is drawn from the May 10 high at 0.6382, while the upward-sloping trendline originates from the May 31 low at 0.5985.
Presently, the Kiwi asset faces resistance near the 200-period Exponential Moving Average (EMA) at approximately 0.6226, implying a bearish long-term trend.
Meanwhile, the Relative Strength Index (RSI) (14) is fluctuating between the 40.00-60.00 range, reflecting lackluster performance.
If the NZD/USD decisively breaks below the round-level support at 0.6200, it could decline towards the July 26 low at 0.6156. A further slip below this level would potentially push the asset towards the June 29 high around 0.6100.
Conversely, a confident upward movement beyond July 19 low at 0.6225 would propel the pair towards the July 20 high just above 0.6300, followed by the July 18 high at 0.6343.
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