The NZD/USD pair skyrocketed to a four-month high near 0.6220 during Wednesday’s New York session. This significant move was triggered by a softer-than-expected US Consumer Price Index (CPI) report, fueling expectations of a Federal Reserve (Fed) rate cut as early as September, which in turn boosted risk appetite among investors.
US Inflation Cools, Kiwi Flies High
The surprisingly low US inflation figures for May bolstered the kiwi’s strength, as investors increasingly anticipate a Fed rate cut to counter cooling price pressures. This has led to a surge in the NZD/USD pair, reaching levels not seen since January.
Fed Decision and Dot Plot in the Spotlight
While the market consensus is for the Fed to keep interest rates unchanged, all eyes will be on the updated “dot plot,” which will provide critical insights into policymakers’ future rate path projections. Given the softer inflation data, fewer rate cuts may be anticipated than previously forecast.
RBNZ Rate Expectations and Technical Outlook
In New Zealand, expectations for the Reserve Bank of New Zealand (RBNZ) to maintain interest rates throughout the year have further contributed to the kiwi’s positive momentum.
Technically, the NZD/USD pair appears poised for an Inverted Head and Shoulders (H&S) pattern breakout, a bullish signal that could drive further gains. The 20-day and 50-day Exponential Moving Averages (EMAs) are providing solid support, and the Relative Strength Index (RSI) has surged into the bullish territory of 60.00-80.00.
Key Levels to Watch
Should the pair establish itself above 0.6220, further upside could target the January highs around 0.6250 and 0.6280. Conversely, a break below 0.6050 might trigger a pullback towards 0.6000 and the April high of 0.5969.
