NZD/USD: Bearish patterns emerge ahead of FOMC minutes

The NZD/USD pair retreated ahead of the upcoming Federal Open Market Committee (FOMC) minutes. The pair also reacted to the strong producer price index (PPI) data from New Zealand. It is trading at 0.7235, which is slightly below yesterday’s high of 0.7270.

New Zealand PPI

Inflation is part of the dual mandate of most central banks. Therefore, forex traders pay close attention to consumer and producer price inflation. In a report published today, New Zealand’s statistics agency said that PPI output increased from 0.1% in the fourth quarter to 2.1% in the first quarter. In the same period, the PPI output rose from 0.5% to 1.2%.

The PPI was mostly because of a 28.7% increase in prices paid by electricity and gas supply producers in the quarter. They also boosted the prices they receive for production by 17.4%. This increase was the highest since 2018 during the country’s power crisis.

In general, the New Zealand economy has emerged from the pandemic faster than its peers. This is because the country responded to the pandemic well. In total, New Zealand reported about 2,000 coronavirus cases and just 25 deaths. Also, the prices of its agricultural commodities have been relatively strong, helped by demand from China. However, the important tourism sector has suffered because of the border closure.

Last week, the NZD/USD pair reacted to the recent retail sales data. According to the bureau, retail card spending rose to N$6.1 billion in April. This was N$234 million higher than in the previous month. The spending rose in all major industries like apparel and furniture.

Looking ahead, the pair will today react to the upcoming Fed minutes. These minutes will provide colour to the thinking of the policymakers in the recent meeting.

NZD/USD technical forecast

The four-hour chart shows that the NZD/USD pair has struggled lately. The pair is trading at 0.7235, which is between the 38.2% and 50% Fibonacci retracement level. It is also slightly above the 25-day and 15-day moving average. The pair has also formed a head and shoulders pattern, which is usually a bearish signal. Similarly, the pair has formed a rising wedge, which is also a bearish sign. It has also formed a double-top pattern. Therefore, the pair may break out lower in the near term.