- NZD/USD will fall to almost 0.5900, when the American dollar trades challenging.
- US President Trump denied the report that he would soon shoot Powell Fed.
- The couple try to stay above 200-day EMA, which trads around 0.5910.
The NZD/USD pair trads 0.6% lower to a close round level of 0.5900 in European commercial hours on Thursday. The couple of kiwi weakens when the US dollar (USD) strengthens, after the comments of the President of the United States (USA) Donald Trump, that they do not shoot the chairman of the federal reserve (Fed) Jerome Powell.
The American dollar index (DXY), which follows the Greenback value compared to the six main currencies, trades strongly to a maximum of over three weeks around 99.00.
On Wednesday, US President Trump rejected the claim that he would soon release Powell Fed, citing that the action may shake markets. “I would like him to give up, it depends on him. They say that he would disrupt the market if I did it,” said Trump in an interview with Real America’s Voice Network.
Meanwhile, traders repaid the Fed Dovish Bets as the latest report of the consumer price indicator (CPI) in June, showed that the prices of products that are largely imported by the US have increased.
NZD/USD moves near the 200-day interpretation average (EMA), which is about 0.5910, suggests that the overall trend has become uncertain.
The 14-day relative strength (RSI) indicator moves below 40.00, which suggests that the rush of inheritance has been launched.
Moving forward, the traffic defect below the low level of June 23 of 0.5883 will expose it to the lowest level of May 12 0.5846, followed by a round level support of 0.5800.
In an alternative scenario, the Kiwi pair would boost towards the highest level of June 19 0.6040 and the lowest level of September 11 0.6100, if it manages to return above the psychological level of 0.6000.
Daily chart NZD/USD
FAQ in American dollars
The American dollar (USD) is the official currency of the United States of America and the “de facto” currency of a significant number of other countries where it is in circulation with local notes. It is most often a commercial currency in the world, which is over 88% of all global currency turnover, i.e. an average of $ 6.6 trillion of transactions per day, according to the data from 2022. After the Second World War, USD took over from the British pound as the reserve currency of the world. For most of its history, the American dollar was supported by gold, up to the Bretton Woods agreement in 1971, when the golden standard disappeared.
The most crucial single factor affecting the value of the American dollar is the monetary policy, which is shaped by the Federal Reserve (FED). The Fed has two seats: achieving price stability (control inflation) and supporting full employment. Its main tool to achieve these two goals is to adjust interest rates. When the prices rise too quickly and inflation is above 2% of the Fed target, the FED will boost the rates, which helps USD values. When inflation drops below 2% or the unemployment rate is too high, the Fed may reduce interest rates that are weighing in the green area.
In extreme situations, the Federal Reserve can also print more dollars and introduce quantitative alleviation (QE). QE is a process in which the Fed significantly increases the credit flow in the detained financial system. It is a non -standard policy measure used in the event of a loan arid, because the banks will not borrow (for fear of the contractor). This is the last last, when just lowering interest rates is unlikely to achieve the necessary result. The weapon of choosing the Fed was a FED weapon to combat the credit crisis, which took place during the great financial crisis in 2008. This includes FED printing more dollars and using them to buy US government bonds mainly from financial institutions. QE usually leads to a weaker American dollar.
Quantitative twist (QT) is the opposite process in which the federal reserve stops buying bonds from financial institutions and will not reinvest from the bonds that it has in recent purchases. This is usually positive for the American dollar.
