Downside in global equity markets as traders digest Fed Chair Jerome Powell’s hawkish comments on Tuesday is weighing on the risk-sensitive kiwi on Wednesday and NZD/USD has turned lower as a result. The pair was last trading just below the 0.6350 mark, down about 0.2% on the day, having failed for a second successive session to push above last Wednesday’s highs around the 0.6380 mark.
A quiet economic calendar for the rest of the week that sees the release of a few tier two US data points, New Zealand Q1 Producer Price Inflation plus the release of the New Zealand annual budget (both on Thursday) means that NZD/USD is likely to continue taking its queue from risk sentiment. Concerns about hawkish central banks at a time when global growth expectations are being revised lower suggests risk assets are unlikely to turn substantially higher before the week is out.
From a technical standpoint, NZD/USD looks very much to still locked within the negative trend that has been in play since early April. Since then, the pair has posted a series of lower lows followed by lower highs. Short-term speculators might thus be shorting the pair at current levels in the hope it will drop back to test last week’s lows just above 0.6200. A break below here opens the door to a run towards the psychologically important 0.6000 mark.