The Federal Reserve (Fed) recently announced that they have not seen significant progress towards their 2% inflation goal, which has led them to maintain a hawkish stance. Despite facing challenges, Fed Chair Powell mentioned that their restrictive policies have helped moderate inflation and have balanced the risks to their dual goals. As a result, markets are now giving up hope of three rate cuts in 2024.
The NZD/USD saw some momentum following the Fed’s decision to hold rates steady at the 5.25-5.50% range. Powell’s cautious tone and emphasis on data dependency were perceived as dovish by investors, leading to a sell-off of the USD. Powell also noted that the Fed still requires more evidence to confidently consider cutting rates, as inflation progress has stalled in recent months. If data continues to align with the Fed’s forecasts, rate cuts may be considered in the future.
Market expectations have shifted, with hopes of rate cuts in June and July now pushed to September or November. In terms of technical analysis, the NZD/USD is currently under significant downward pressure, trading below key moving averages. While there are some positive signals in the short term, the overall picture leans towards a bearish outlook. Sellers may continue to dominate, but a move towards the 20-day SMA could potentially improve the outlook for the pair.