NZD/USD trades at a new weekly high of 0.7995 after a series of mixed US data prints. The exchange rate could continue to retrace its decline following the Federal Reserve interest rates decision, which extends the string of higher highs/lows since the beginning of the week.
NZD/USD CLIMBS BACK ABOVE200-DAY SMA AS BULLISH PRICES SERIES PERSISTS
NZD/ rises above the 200-Day Moving Average (0.7043). After falling below the moving average since March 2020, the exchange rate may stage an even larger rebound over the remaining month. New data from the US points to continued economic weakness.
According to the latest update to the Personal Consumption Expenditure Price Index (PCE), the headline reading rose to 3.9% per annum from 3.6% in April. The Fed's preferred gauge of inflation widened to 3.4% from 3.1% over the same period. The unexpectedly flat US Personal Spending in May was despite an increase of 0.9% in April. These mixed data prints could encourage the Federal Open Market Committee to maintain the current course of monetary policy, as the central bank prepares for a temporary rise in inflation.
It is unclear if the FOMC will adjust its forward guidance as Fed officials project two rate increases for 2023. However, it appears that the central bank will follow the same guidelines at the next interest-rate decision on July 28. Chairman Jerome Powell has pledged to give "advance notice before announcing any change to our purchases."
NZD/USD will continue to fall after the Fed rate decision, as it extends bullish price series since the beginning of the week. However, the recent rebound has triggered a change in retail sentiment similar to the behavior seen earlier in the year.
The IG Client Sentiment Report shows that 49.12% of traders are net-long NZD/USD at the moment, with the ratio between traders short and long standing at 1.04-1.
Today's net-long traders are 10.23% less than yesterday, 12.03% less than last week, and the net-short traders are 2.25% more than yesterday and 6.35% lower than last week. As NZD/USD traded at a new weekly high (0.7095), the decline in net long position could be explained by profit-taking. However, the increase in net short interest has helped fuel the shift in retail mood as 56.51% were net-long the pair as of June 15.
The recent rebound in NZD/USD could be due to the shift in retail mood to largely mirror the behavior from earlier in the year. Furthermore, the Fed rate decision may have a negative impact on the exchange rate as it prolongs the string of higher highs and lower lows that began at the beginning of the week.