New Zealand dollar sliding, GDP next

NZD/USD has extended its losses today. In the North American session, NZD/USD is trading at 0.6222, down 0.59% on the day.

The New Zealand dollar continues to fall, and fast. The currency has slumped 1.93% this week and is trading just above 0.6216, a 2-year low.

Market jitters ahead of FOMC

There is plenty of hand-wringing ahead of the FOMC meeting on Wednesday, as the financial markets nervously await the next rate increase. The meeting is live, with the Fed most likely to raise rates by 0.50% for a second straight meeting. However, there are voices calling for a massive 0.75% hike, notably, the chief economist at Goldman Sachs. It would be a shock if the Fed delivered a 0.75% increase, given the turbulent economic environment. The recent US inflation report shows inflation continues to accelerate, raising doubts that an aggressive Fed can guide the economy to a soft landing and the inversion of US Treasury yields is adding to these concerns. A 0.75% salvo from the Fed could lead to a sharp backlash from the markets, which the Fed will be keen to avoid.

The US dollar enjoyed a spectacular day on Monday against most major currencies, and the dollar index surged above resistance at 105. US 10-year yields rose as high as 3.38% earlier in the day, and the upward movement continues to support the US dollar. Risk-correlated currencies like the New Zealand dollar were pummelled, with NZD/USD falling by 1.49%.

New Zealand releases first-quarter GDP on Wednesday, with the markets bracing for a modest gain of 0.6% QoQ. This follows a 3.0% gain in Q4. The Reserve Bank of New Zealand will be keeping a close eye on the strength of the economy, as the Bank tries to steer the economy to a soft landing while raising interest rates.

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NZD/USD Technical

• NZD/USD is testing support at 0.6244. Below, there is support at 0.6099
• There is resistance at 0.6288 and 0.6413

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