The NZD/USD price crashed to the lowest level since 2020 as the US dollar index (DXY) surged. The pair dropped to a low of 0.600, which was about 20% below the highest level in 2021. It has crashed by more than 12% this year.
New Zealand GDP data ahead
The NZD to USD exchange rate has been in a strong bearish trend in the past few weeks. This decline happened as the risk-off sentiment continued in the market as the Fed continued its tightening. The bank has already hiked interest rates by 225 basis points this year. Officials have hinted that the bank will continue hiking this year in a bid to lower the soaring inflation.
The clarity of more rate hikes by the Fed emerged on Tuesday after the US inflation data. These numbers revealed that the country’s inflation rose at a faster pace than analysts were expecting. The headline CPI rose by 8.3% in August, while the core CPI jumped by 6.3%. Before the release, most analysts were expecting that inflation would pull back in August as the price of gasoline dropped.
NZD/USD pair dropped after the latest current account data from New Zealand. The numbers show that the current account rose by over N$5.22 billion in the second quarter. The current account as a percentage of the GDP was -7.7%, which was worse than the expected -7.40%.
The next key catalyst for the NZD/USD pair will be the latest New Zealand GDP data scheduled for Thursday. Analysts expect the data to show that the economy expanded by 1.0% in Q2 on a year-on-year basis and by 0.2% on a QoQ basis.
NZD/USD forecast
In my recent article on the New Zealand dollar, I warned that the pair could crash to 0.600 in September. The daily chart shows that the NZD to USD exchange rate has been in a strong bearish trend in the past few days. It dropped below the important support level at 0.6060.
The pair dropped below the 25-day and 50-day moving averages while the MACD continued falling. Therefore, it seems like the pair has a bearish momentum. If this happens, the next key support level to watch will be at 0.5900. A move above the resistance level at 0.6100 will invalidate the bearish view.
