NZD drifting, US New Home Sales next

The New Zealand dollar is paddling in calm waters, as NZD/USD trades close to 1-month lows. In the European session, NZD/USD is trading at 0.6176, up 0.10%. The kiwi is still smarting from a disastrous week, in which NZD/USD plunged 4.40%.

RBNZ coy on its plans

The RBNZ is in the midst of an aggressive rate-hike cycle, having raised rates by 50 basis points for a fourth consecutive time. The central bank is expected to add another 50bp hike at the October meeting, which would bring the cash rate to 3.50%. Inflation has hit 7.3%, but the RBNZ is confident that it will peak soon and expects inflation to fall to 3.8% by the end of 2023. The central bank is cautiously positive about the economic outlook, predicting that the economic downturn will not turn into a recession.

Deputy Governor Christian Hawkesby said in an interview this week that the slowdown should lower inflation and bring employment to a more “sustainable level”. Hawkesby said that the RBNZ was deliberately being ambiguous about the peak for rate levels, saying it could be at 4.00% or 4.25% or thereabouts. He added that more rate hikes are coming, while acknowledging that the pace of tightening could slow in the near future.

We’ll get a look at some key US events today and Wednesday that could have an impact on the direction of the US dollar. New Home Sales will be released later today, with a forecast of 575 thousand for July, following 590 thousand in June. Durable goods orders will be published on Wednesday, with the headline reading expected to slow to 0.6% in July, down sharply from 2.0% in June. With the Federal Reserve saying that rate policy will depend to a large extent on the strength of economic data, investors are keeping a close eye on key US events and we could see some movement in the currency markets following these releases.

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NZD/USD Technical

• NZD/USD faces resistance at 0.6227 and 0.6366
• There is support at 0.6126 and 0.6075

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