NZD/USD is on the backfoot ahead of the ECB

• NZD/USD is meeting a key resistance area that is holding ahead of the ECB.
• The bias will be on the downside for the forseeible future for a potential lower low.

At 0.6445, NZD/USD has been in the hands of the bears mid-week and falling within the 0.64 area back towards the lows of the bearish daily cycle that began at the end of May when the bulls were capped on the last trading day of the month at 0.6563.

The commodity complex has struggled in June as investors were the complications of rising inflation, hawkish central banks, and dire geopolitics global growth prospects. 

On Wednesday, equity markets traded slightly weaker in a familiar sour tone ahead of tonight’s European Central Bank meeting and key US events at the end of this week. The Federal Reserve is also just around the corner making for a nervous time in financial markets. The US 10-year auction hit a high yield of 3.03% on Wednesday, up from the 2.943% high in the previous auction. We have seen a subsequent rally in US yields and the 10-year now stands 1.54% higher on the day, supporting the greenback, and weighing on US stocks.

ECB in focus

''Both central banks will update their macroeconomic projections, and we expect that inflation forecasts will be raised, interest rate projections raised, and GDP forecasts cut,'' analysts at ANZ bank said in a note on Thursday morning. ''That is not a good combination for financial markets, and investors are likely to remain defensive as a result. We expect the ECB will err on the side of hawkishness as President Lagarde conveys the central bank’s determination to safeguard price stability. While she favors a gradual approach to normalizing policy, she cannot completely rule out the need for 50bps rate rises as the headline and core inflation pressures continue to intensify.''

NZD/USD techncial analysis

Meanwhile, from a technical standpoint, the price was meeting a key resistance area that is holding, so the bias will be on the downside for the foreseeable future for a potential lower low within the broader weekly bear trend: