NZD/USD bulls point to a firmer correction from 0.6100 support

• The NZD/USD consolidates the strength of the US dollar and sits on a key support.
• The Kiwi is below horizontal resistance and the trend line that confluences with the 38.2% ratio.

The pair NZD/USD It is sideways on the day during the closing hours of the American session, with the US dollar’s rally halting after reaching 105.88 against a basket of currencies, the highest level since December 1. So far, the NZD/USD pair has ranged from a low of 0.6084 to 0.6137.

On Tuesday, the Fed chair surprised markets with a more aggressive rate outlook, saying the Fed would likely have to raise interest rates more than expected in response to recent strong data, and that it is prepared to take bigger steps if the “totality” of the incoming data suggests that tougher measures are needed to control inflation.

This has led Fed funds futures markets to price the probability of a 50 basis point hike at the Fed meeting on March 21-22 at 66%, up from 22% prior to the intervention. from Powell on Tuesday. Looking ahead, 25 basis point hikes are forecast for May and June, which would put Fed Funds at 5.50-5.75%, with a near 30% chance of a final 25 basis point hike in the third quarter. quarter, which would raise the range to 5.75-6.0%,” say analysts at Brown Brothers Harriman.

After all this, an easing cycle is still expected to start in Q4, albeit with much less chance. Ultimately, it should be fully and unequivocally priced in until 2024 during the Fed’s next price review phase. For now, we believe that the uptrends in US yields and the dollar remain intact,” the analysts added.

Investors are now focused on the February jobs data in non-farm payrolls, due to be released on Friday. “US payrolls likely recovered at a still-firm pace in February, following the unexpected rise of 517,000 in January. We also expect the EU rate to remain unchanged at 3.4% and wage growth to come in at a strong 0.4% month-on-month,” said analysts at TD Securities.

RBNZ Outlook

Meanwhile, ANZ Bank analysts said they continue to see the Reserve Bank of New Zealand raising the OCR to a high of 5.25% in May 2023, and holding it there until at least the end of 2024. ”But the job market The tight and uncertain impacts of the cyclone pose upside risks to the outlook for both inflation and the OCR”.

NZD/USD Technical Analysis

NZD/USD is below horizontal resistance and the trend line confluence with the 38.2% ratio with prospects for a firmer correction as it holds support near 0.61.