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NZD/USD Slips as Powell Comments and US Data Dent Risk Appetite
Economic
Traders' Opinions
Summary:
The New Zealand Dollar dipped as investor appetite soured despite Wellington’s NZ$190 million social investment fund initiative.
Sell
CLOSEDNZDUSD
End Time
0.58700
Entry Price
0.57400
TP
0.59700
SL
0.59693 +0.00012 +0.02%
1000
Points
Loss
0.57400
TP
0.59702
CLOSING
0.58700
Entry Price
0.59700
SL
The New Zealand Dollar (NZD) fell sharply on Thursday, succumbing to risk-off sentiment and a firmer US Dollar, even as the domestic government unveiled a targeted NZ$190 million ($112 million) social investment fund aimed at improving long-term social outcomes. While the initiative underscores a fiscally responsible and data-driven policy direction, it failed to offset the pressure stemming from global macroeconomic headwinds and the enduring strength of the Greenback, particularly following comments from Federal Reserve Chair Jerome Powell.
At the time of writing, NZD/USD was trading at 0.5870, down 0.43% on the day, marking a reversal from earlier week gains. The Kiwi’s retreat underscores the market’s preference for safety as a murky economic outlook in both the US and New Zealand clouds sentiment.
In a development that typically might favor risk currencies like the NZD, US inflation data came in cooler than expected. April’s Producer Price Index (PPI) rose just 0.1% month-on-month versus expectations of a 0.3% increase, while core PPI eased to 0.2% from the prior 0.3%. On the surface, this reinforced bets that the Fed may be nearing its pivot point in the tightening cycle, potentially paving the way for rate cuts later this year.
However, the market reaction was far from straightforward.
Offsetting the soft inflation print, Federal Reserve Chair Jerome Powell delivered a subtly hawkish message, acknowledging that the Fed may need to adapt its policy framework to accommodate persistent and more frequent supply shocks — a nod to the structural changes underway in the post-pandemic global economy. “The framework needs to be robust to many circumstances, including a world where supply shocks may be more frequent and persistent,” Powell stated in remarks reported by Reuters.
His comments, while not overtly dovish, signaled a Federal Reserve still cautious about loosening policy too soon. This nuanced tone, combined with weaker-than-expected US retail sales figures (flat in April vs. 0.4% forecast), underpinned modest support for the US Dollar. Market participants interpreted Powell’s stance as an affirmation that the Fed is in no rush to ease, especially with inflation expectations still delicately balanced.
On the home front, the New Zealand government’s pre-budget announcement of a NZ$190 million social investment fund was met with a muted market response. Finance Minister Nicola Willis emphasized that the initiative aims to create “smarter, earlier” interventions to improve outcomes for vulnerable communities — a signal of Wellington’s continued commitment to data-led governance and fiscal prudence.
“It’s about government investing earlier, smarter, and with much more transparent measurement of the impact interventions are having,” said Willis.
Despite the program’s social merit and long-term focus, currency traders were unmoved, as the short-term economic outlook remains dominated by global factors, including China’s faltering recovery and uncertainty over the Reserve Bank of New Zealand’s (RBNZ) policy trajectory. Investors are awaiting concrete signs of domestic economic resilience before pricing in any substantial upside for the Kiwi.
Traders are now turning their attention to a pair of crucial domestic data points that could influence the NZD's next directional bias. Thursday evening’s release of the Business NZ Performance of Manufacturing Index (PMI), last seen at 53.2, will be scrutinized for signs of whether New Zealand’s industrial momentum is holding up. A soft reading could further dampen sentiment toward the Kiwi.
More critical, perhaps, is Friday’s RBNZ two-year inflation expectations survey. Previously at 2.06%, an uptick could reignite market expectations for prolonged RBNZ hawkishness — a possible support pillar for NZD. However, if expectations ease, it would reinforce dovish bets and increase downside risk.
Technical Analysis
From a technical perspective, NZD/USD has surrendered gains from earlier this week, falling back below the psychological 0.5900 threshold. Price action is struggling to maintain traction above the 23.6% Fibonacci retracement at 0.5900 and 78.6% Fibonacci extension at 0.5930. This area now acts as immediate resistance.
If downside momentum persists, the next key support lies around 0.5820 (38.2% Fibonacci retracement), with further weakness exposing 0.5740–0.5760, a zone defined by the 78.6% retracement and full Fibonacci extension levels.
Still, the decline could prove corrective rather than impulsive. Should NZD/USD hold above the weekly low of 0.5847 and manage to reclaim the 0.5900–0.5930 region, bulls may target a retest of the monthly high at 0.6023. A breakout beyond the April peak at 0.6029 and the November high at 0.6038 would clear the way toward 0.6070 — a key Fibonacci extension zone.
TRADE RECOMMENDATION
SELL NZDUSD
ENTYR PRICE: 0.5870
STOP LOSS: 0.5970
TAKKE PROFIT: 0.5740
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