Tonight the Federal Reserve Open Market Committee (FOMC) wraps up its two-day meeting and delivers a change in interest-rates. The FOMC is widely expected to hike rates 75-bp from 1.75% to 2.5%. However, traders will pay particular attention to the press conference following the announcement. Markets are likely to be volatile and skittish during Fed Chair Powell's address, as traders digest the Fed's forward guidance.
There is speculation that an impending recession in the U.S may force the Fed to pivot to a more-dovish stance later in the year, causing the U.S Dollar to sell-off. However, analyst at Brown Brothers Harriman remain unconvinced:
"Yes, the US economic data have been weakening, but we do not think a recession is imminent,".
The BBH analyst predicts a period of consolidation for the greenback, noting the "US economy remains the most resilient".
"The outlook for the NZD in the coming months is likely to influenced by what the RBNZ may have got right. Since the RBNZ was quick to tighten policy relative to its peers, it may reach peak interest rates ahead of other central banks. This could have negative implications for the NZD vs some of its peers."
NZD/USD Back to Lows Says Rabobank
"In our view, USD strength is likely to push NZD/USD back towards its recent lows in the 0,61 area on a 1 to 3 month view", Rabobank said.
The bank also cited sluggish Chinese growth and new Zealand's reliance on Oil imports as potential headwinds moving forward.
Kiwi to US Dollar Technical Outlook
The first thing that jumps out from the daily chart, is the 50-Day Moving Average (DMA). The 50 DMA (green line) has been a strong area of support and resistance for the NZD/USD this year.
Notably, last week's rally fell short just below the moving average at 0.6309. For that reason, the 50 DMA is a significant hurdle for the bulls. Should the price clear the 50 DMA, we could expect an extension towards the June highs at around 0.6400.
By contrast, failure to clear 0.6309 will encourage the bears, and bring this month's 2-year low back into view.