NZD/USD forecast: Kiwi is ripe for a bearish breakout

The NZD/USD exchange rate moved sideways on Wednesday morning as US bond yields rose and after the latest New Zealand retail sales. The pair was trading at 0.5950, a few points above last week’s low of 0.5893.

New Zealand retail sales

The NZD/USD pair has remained in a tight range in the past few weeks as investors focus on the US bond market. A bond sell-off has intensified, pushing them to the highest level in a decade.

This performance is a sign that the Federal Reserve will continue hiking interest rates in the coming meetings. Most analysts expect the Fed to hike by 0.25% in September followed by an extended pause.

Additional rate hikes will likely slow the economy further. The most recent data shows that mortgage rates have surged to over 7% while loan delinquencies have jumped to the highest level in years.

The next key catalyst for the NZD/USD will be the upcoming Jackson Hole Symposium in the United States. This meeting provides a chance for central bank officials to provide guidance of what to expect.

The NZD to USD pair also reacted to the latest New Zealand retail sales numbers. According to the statistics agency, core retail sales dropped by 1.8% in Q2 after falling by 1.6% in the previous quarter. This decline was smaller than the median estimate of 2.5%. 

The general retail sales fell by 1.0% in the quarter from the previous 1.6%. These numbers mean that New Zealand’s economy is still struggling after entering into a recession earlier this month. The RBNZ has paused its rate hikes recently.

NZD/USD technical analysis

The NZD/USD exchange rate has been in a strong bearish trend after peaking at 0.6413 in July. It dropped to a low of 0.5893 last week. A closer look shows that it has formed a descending channel shown in black. It has moved to the upper side of this channel.

The pair remains below the 50-day moving average while the Relative Strength Index (RSI) has drifted upwards. Therefore, the pair will likely resume the bearish trend in the coming days as sellers target the key support at 0.5893.

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