08.02.2023 11:46 PM
Powell's expected speech turned out to be uninformative. Overview of USD, NZD, AUD

The main event of Tuesday, and maybe the entire week, was the interview of Federal Reserve Chairman Jerome Powell. As soon as he started talking, the markets began to rush, which is a sign of high uncertainty. At the beginning of the interview, Powell's stance was dovish, which caused stocks to bounce and U.S. Treasury yields to fall. However, Powell's concluding remarks were more hawkish, noting that if strong labor data persisted, the peak rate in the current tightening cycle could be higher. Overall, it should be noted that Powell's comments did not exactly provide a lot of new information, he did not delve into the topic of a strong labor market as observers had expected.

The U.S. stock market immediately went up, and the U.S. dollar rolled back down. So far, it seems like the effect of the ultra-optimistic NonFarm Payrolls report has worn off, as well as the Fed's rate forecast, and now it's up to the real macro data, which will show which of the scenarios will develop. The three voting FOMC members (Williams, Kashkari, Waller), plus the non-voting Bostic from the Atlanta Fed are scheduled to speak, they will probably expand on what Powell said on Tuesday.

The next strong driver won't come until next week, since the U.S. inflation report for January will be released on Tuesday. The strong rise in 5-year Tips bond yields showing an average inflation forecast for the next 5 years suggests that the decline in inflation may be slowing, this is also a factor in favor of a stronger dollar.

This image is no longer relevant

Until the end of the week, we expect trading to be generally calm.


New Zealand's economy, which until recently seemed to be an example of resilience, is experiencing more and more difficulties. 4Q labor market data was weaker than forecasts (including Reserve Bank of New Zealand forecasts), labor demand outlooks have declined significantly in recent months, and unemployment is now forecast to continue rising slightly in the first half of 2023 and then pick up faster in the second half of the year as the sharp rise in interest rates causes the economy to contract. Unemployment is expected to rise to a peak of 5.4% in 2024 from 3.4% currently.

People are reassessing their projections regarding the RBNZ's rate. Whereas a couple of weeks ago, the Fed peak rate was viewed as 5% and the RBNZ's rate as 5.75%, the situation has now changed. The Fed peak is at about 5.15% and the RBNZ peak is at 5.2%, which means that the expected yield spread is gone and the kiwi has accordingly lost the main driver that has supported its growth since October.

In the absence of CFTC data, the estimated price reversed slightly downwards, which also indicates that the bullish momentum of the NZD has weakened.

This image is no longer relevant

The likelihood that NZDUSD can return to the 0.6532 high is getting smaller. At the moment, the most likely scenario is a slight pullback from the low at 0.6263, with the pair moving into a sideways range while 0.6532 will serve as the upper limit as we anticipate new data. The first quarter of this year will provide a lot of new information, primarily regarding the depth of the expected recession, the reaction of both the RBNZ and the Fed is unlikely to be aggressive, so it is unlikely for a new strong driver to form a strong trend right now.


The Reserve Bank of Australia raised its cash rate by 25 basis points to 3.35%, the ninth consecutive rate hike since May. The accompanying statement was also hawkish, as the RBA expects "...more interest rate hikes will be required in the coming months...". The "plural" form in this wording suggests that the RBA expects at least two more 25bp rate hikes in the coming months, most likely in March, and then possibly another in April or May. The key data to look out for ahead of the next RBA meeting are the wage price index on February 22 and GDP growth rate on March 1.

The aussie rebounded from Friday's Nonfarm, mostly due to the hawkish stance of the RBA. An extremely positive report on inflation is not expected; the forecast is that inflation could fall to 4.75% this year and to 3% by mid-2025, which means it will remain above the target for a long time to come. Accordingly, the RBA's position is unlikely to change much in the coming months.

If the U.S. recession really turns out to be shallow, commodity prices will not collapse, which means that export-oriented countries will get an additional growth factor. As long as financial flows indicate that AUD demand continues to rise, the settlement price is pointing upwards, the aussie has reason to resume growth.

This image is no longer relevant

I expect the resistance zone at 0.7140/60 to be tested again, technically, the trend is still bullish. We don't know whether the aussie will be able to go higher. The recent low at 0.6856 will act as support, there is no reason for deeper decline. Bullish momentum on the AUDNZD cross persists.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2023
New Zealand Dollar vs US Dollar
Select timeframe
Start trade
Start trade
  • Grand Choice
    Contest by
    InstaForex always strives to help you
    fulfill your biggest dreams.
  • Chancy Deposit
    Deposit your account with $3,000 and get $8000 more!
    In March we raffle $8000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
  • 30% Bonus
    Receive a 30% bonus every time you top up your account

Recommended Stories

Chances of gold from $2,000

According to Willem Middelkoop, chief investment officer and founder of Commodity Discovery Fund, the rise in prices for the precious metal this year to record levels is only a matter

Irina Yanina 11:03 2023-03-21 UTC+2

Euro rises as ECB chief Christine Lagarde says they are not done raising rates

EUR/USD rose on Monday as statements of ECB President Christine Lagarde indicated that the central bank does not plan on abandoning its aggressive rate hike even amid the current situation

Jakub Novak 10:45 2023-03-21 UTC+2

The Fed could give up on further rate hikes as early as tomorrow

Both euro and pound continue to see gains as expectations of a pause in interest rate hikes by the Fed grows stronger. Late last week, many economists expressed belief that

Jakub Novak 10:17 2023-03-21 UTC+2

GBP/USD. Overview for March 21, 2023

On Monday, the GBP/USD currency pair confidently continued on its upward trend, which no longer exactly fits the definition of a "swing." The pair did surpass both its most recent

Paolo Greco 10:01 2023-03-21 UTC+2

EUR/USD. Overview for March 21, 2023

On Monday, the EUR/USD currency pair was trading higher once more, which makes sense but only takes into account one factor. "Technique" is this factor. The fact is that

Paolo Greco 08:52 2023-03-21 UTC+2

ECB is not going to stop, but together with the Bank of England may slow down the rate increase

The past and current weeks were supposed to pass exclusively to the accompaniment of central banks. Let me remind you that last week the ECB held meetings, and this week

Chin Zhao 22:53 2023-03-20 UTC+2

USD/JPY. The yen follows the dollar: the dollar sets the tone for trading

The USD/JPY pair updated its five-week low today (reaching 130.50) but subsequently returned to its former position, the opening price. The US dollar's strength/weakness is what causes the upward/downward dynamics;

Irina Manzenko 19:00 2023-03-20 UTC+2

EUR/USD on a bullish rally

The banking crisis could be the black swan that makes a bearish stock market turn around. Ironically, this is usually the case. Investors focus on an event that is initially

Marek Petkovich 16:04 2023-03-20 UTC+2

Is the gold market overbought?

Gold prices could rise this week as bullish sentiment grows among retail investors seeking to protect themselves from a major banking crisis like 2008. Nevertheless, Wall Street analysts take

Irina Yanina 13:43 2023-03-20 UTC+2

EUR/USD: Credit Suisse bailout and traders' caution

At the beginning of a new trading week the euro-dollar pair failed to determine the vector of its movement. Although EUR/USD opened with a bullish gap and rose

Irina Manzenko 12:48 2023-03-20 UTC+2
Can't speak right now?
Ask your question in the chat.