Kiwi Surge Amid Fed Rate Cut Bets, Positive China Data

Fundamental Analysis

* Kiwi Boost: The New Zealand Dollar continues to extend its rally against the US Dollar, reaching a three-month high as investors start to anticipate two interest rate cuts by the Federal Reserve, which weakens the greenback. Despite better-than-expected ISM Service PMI data, the dollar’s strength was short-lived due to recent U.S. GDP figures and increasing signs of a weakening labor market, which have fueled expectations of Fed rate cuts. A Reuters poll indicates that most forecasters believe the Fed will reduce its key interest rate in September and once more this year. Traders are currently pricing in about a 70% chance of a Fed rate cut in September, according to CME FedWatch. Additionally, positive data from China provides further support for the Kiwi as China is New Zealand largest trading partner. The latest data from Caixin revealed that China’s Services PMI rose to 54.0 in May from 52.5 in April, significantly exceeding market expectations of 52.6.

Technical Analysis

* Technical Breakout: NZDUSD was traded higher following prior breakout above the previous resistance level 0.62050. MACD which illustrate persistent bullish momentum signal with the recent bullish structure breakout suggest the pair to further extend its gains.

* Resistance and Support: If the bullish momentum persists, there’s a strong likelihood that the price will potentially head towards 0.62700. Conversely, a potential retracement is also to be expected and the price could head back towards 0.61450 should the price breach back above the 0.60500 level.

Understand how technical analysis can help you in this trading opportunity.

Potential Risks

Moving forward, investors will closely monitor upcoming data from the U.S such as U.S ADP Employment Change figures, and Non-Farm Payrolls (NFP) later this week to seek further cues for market direction.

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Monitoring

Stay updated on US and New Zealand data, central bank updates and any shifts in the US Dollar’s strength by following PU Prime’s market insights and daily financial news.

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.