NZD/USD stays bearish around mid-0.6200s on downbeat NZ Retail Sales, RBNZ, Fed Minutes eyed

• NZD/USD holds lower grounds as New Zealand’s Q1 Retail Sales growth disappoints ahead of RBNZ.
• Fears of US default weigh on market sentiment, as well as on Kiwi prices, amid lackluster debt ceiling talks.
• Hopes of witnessing one last rate hike from RBNZ keeps NZD/USD bears on the lookout for dovish signs.
• Fed Minutes, risk catalysts can entertain traders past RBNZ.

NZD/USD fades bounce off intraday low on downbeat New Zealand Retail Sales, as well as the risk-off mood, to around 0.6250 during early Wednesday. In doing so, the Kiwi pair portrays the market’s hesitance in reacting to the key NZ data as traders await the Reserve Bank of New Zealand (RBNZ) Monetary Policy Decision.

Also read: RBNZ Interest Rate Decision Preview: Kiwi set to fly on a hawkish rate hike

New Zealand’s first quarter (Q1) Retail Sales marked a contraction of 1.4% QoQ versus -0.4% expected and -0.6% prior while the YoY figures dropped to -4.1% versus -4.0% previous readings.

Apart from the downbeat NZ data, the market’s risk aversion also weighs on the NZD/USD price. That said, escalating fears of the US default and anxiety ahead of the RBNZ interest rate decision seems to contribute the maximum in the latest sour sentiment. Furthermore, the US-China tension and the West versus Russian jitters are also on the table to challenges the mood, as well as the Kiwi pair price.

That said, no progress in the talks to avoid the US debt ceiling expiration and fears that the US may actually mark the ‘catastrophic’ default weighed on the market sentiment of late. Recently, US House Speaker Kevin McCarthy crossed wires, via Reuters, while suggesting no deal on the debt ceiling extension today but repeating previous optimism that they will get agreement before June 01. Previously, Washington rolled out news stating the US Treasury has asked multiple agencies if they can delay the payment demands.

On the other hand, hawkish Fed bets increased after preliminary figures of the May monthly PMIs signaled that the US Services sector keeps outgrowing the manufacturing ones and fuelled the Composite PMI figure to the highest levels in a year.  That said, the US S&P Global Manufacturing PMI eased to 48.5 from 50.2 versus 50.0 market forecasts whereas Sevices PMI rose to 55.1 compared to 52.6 expected and 53.6. With this, the Composite PMI marked 54.5 figures versus the analysts’ expectations of 50.0 and 53.4.

Additionally fueling the hawkish Fed concerns are the latest comments from Atlanta Fed President Raphael Bostic, Richmond Fed President Thomas Barkin and San Francisco President Mary C Daly who backed the calls for higher Fed rates while citing the inflation woes, which in turn propelled the betts on the Fed rate increase in June. The same pushes back the Fed rate cut and allows the US Dollar to remain firmer despite a retreat in the US Treasury bond yields.

Moving on, the Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Meeting and risk catalysts can entertain the NZD/USD pair during the early part of the day. Following that, the latest Federal Open Market Committee (FOMC) Meeting Minutes will be crucial to watch. That said, the RBNZ is expected to announce 0.25% rate hike but the future guidance for the rates will be the key to watch.

Ahead of the RBNZ, Analysts at the ANZ said, “We expect a 25bp hike but wouldn’t at all be surprised to see 50bp. But what we think matters most given the focus on carry is where the OCR peaks in the RBNZ’s projections. Anything with a 6-handle is likely to be NZD-supportive, global issues notwithstanding.”

Technical analysis

A fortnight-old symmetrical triangle restricts immediate moves of the NZD/USD between 0.6225 and 0.6270 as RSI, as well as the MACD, teases bears.