NZD/USD erases daily gains, tests 0.65 amid broad USD strength
- US Dollar Index climbs higher above 98.
- First-quarter US GDP growth ticks down to 3.1%.
- RBNZ's Financial Stability Report recognizes elevated financial system risks.
After touching a fresh daily high of 0.6528, the NZD/USD pair reversed its direction and tested the critical 0.65 handle pressured by the broad-based USD strength. As of writing, the pair was trading at 0.6505, losing 0.06% on a daily basis.
The report published by the U.S. Bureau of Economic Analysis today revealed that the GDP in the first quarter was expected to expand by 3.1%. Although this reading came in line with the market expectation, further details of the publication showed that the core Personal Consumption Expenditures dropped to 1% in the first quarter from 1.3%. Nevertheless, the greenback largely ignored the data and the US Dollar Index inched close to the 2-year high that it set last week at 98.37 supported by the decisive rebound witnessed in the Treasury bond yields. As of writing, the DXY, which touched a session top of 98.28, was clinging to small gains at 98.18.
Earlier today, the Reserve Bank of New Zealand in its Financial Stability Report noted that the financial system was still resilient to a broad range of economic risks that remain elevated.
Commenting on the RBNZ's remarks and the bank's policy outlook, "On balance we think the RBNZ will be happy to let things run for a while as it assesses how the opposing forces play out, but it’s possible they deliver a small tweak in recognition of the fact that these restrictions were only ever intended to be temporary. If so, it’ll be small and not a game-changer," ANZ analysts said.
There won't be any macroeconomic data releases from New Zealand on Friday and the USD's market valuation is likely to continue to drive the pair's action.
Technical levels to watch for
The initial support for the pair could be seen at 0.6500 (daily low/psychological level) ahead of 0.6480 (May 23 low) and 0.6460 (Oct. 26, 2018, low). On the upside, resistances are located at 0.6530 (daily high), 0.6560 (weekly high) and 0.6630 (50-DMA).