NZD/USD Price Analysis: Exhibits sluggishness amid uncertainty over timing of Fed rate cuts

• NZD/USD trades sideways as investors look for fresh Fed interest rate cues.
• Investors see the Fed easing interest rates twice this year.
• NZD/USD struggles for direction with focus on US core PCE inflation data.

The NZD/USD pair trades in a limited range between 0.6105-0.1030 in Monday’s early American session. The Kiwi asset consolidates as uncertainty over when the Federal Reserve (Fed) will start reducing interest rates has deepened. Investors see the Fed to begin reducing rates from the September and a subsequent move in the November or December meeting.

Contrary to market expectations, Fed policymakers see only one rate cut this year in the last quarter. Officials want to see inflation declining for months to gain conviction before pivoting to policy-normalization.

The US Dollar Index (DXY) has dropped to 105.50 amid a cheerful market mood. On Friday, the US Dollar witnessed strong buying interest as the preliminary S&P Global PMI report showed that overall activity surprisingly expanded, with robust improvement in the manufacturing and service sectors.

This week, investors will focus on the United States (US) core Personal Consumption Expenditure price index (PCE) for May, which will provide fresh cues on when and how much the central bank will reduce interest rates this year.

NZD/USD exhibits an inventory adjustment formation on a four-hour timeframe, which indicates an auction in a limited range with lower volume. Generally, the inventory adjustment process results in a decisive break in either direction. The Kiwi asset trades below the 50-period Exponential Moving Average (EMA) near 0.6133, suggesting a sharp volatility contraction.

The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, indicating indecisiveness among investors.

 Fresh downside would appear if the asset delivers a decisive break below the round-level support of 0.6100. This would drag the asset towards April 4 high around 0.6050 and psychological support of 0.6000.

On the contrary, a reversal move above June 12 high of 0.6222, which will expose the asset January 15 high near 0.6250, followed by January 12 high near 0.6280.

NZD/USD four-hour chart