NZD/USD Retreats as Domestic Data and RBNZ Economic Challenges

The NZD/USD has retreated further from its recent multi-week high, facing pressure from various factors. The New Zealand dollar (NZD) is being undermined by weak domestic data, indicating a 0.1% contraction in the economy in the first quarter and a technical recession. This negative news, combined with the Reserve Bank of New Zealand's (RBNZ) announcement that it has concluded its most aggressive hiking cycle since 1999, has triggered aggressive selling of the NZD/USD pair.

Adding to the downward pressure on the pair is the moderate strength of the US dollar (USD). The USD Index (DXY), which measures the performance of the Greenback against a basket of currencies, has rebounded from a one-month low following the Federal Reserve's (Fed) hawkish outlook and its intention to resume raising interest rates. The Fed has signaled its plan to increase borrowing costs by an additional 50 basis points by the end of December. Market participants have quickly adjusted their expectations and are now pricing in a higher likelihood of a 25 basis points rate hike in July. This supports the US dollar and adds to the selling pressure on the NZD/USD pair.

From a technical perspective, the NZD appears to be within a bearish channel, with the price experiencing a rebound at the 61.8% Fibonacci level. We anticipate a potential drop to the 23.6% level or below the lower boundary of the channel. However, if the price surpasses the 78.6% level, it could indicate a possible long setup to be considered.