US dollar unchanged as Fed commits to low rates

The US dollar was little changed in overnight trading as investors reflected on the Fed interest rate decision. As was widely expected, the Federal Reserve left interest rates unchanged and estimated that the rate will remain so at least until 2022. The bank estimates that the economy would contract by 6.5% this year and the unemployment rate would fall to 9.5%. It also expects personal consumer inflation to be about 1% this year and 1.5% in 2021 As a result, the bank said that it would continue with a quantitative easing program and use all available tools to cushion the economy.

The New Zealand dollar declined even after data from the country showed that retail sales bounced back in May. According to the statistics office, retail credit and debit card spending increased by 79% in May, returning to pre-pandemic levels. Total spending rose to about NZ$ 5.2 billion, up from NZ$2.9 billion in the previous month. Groceries and alcohol were the biggest contributors to the increase. The country said that it would reopen cinemas this weekend.

The economic calendar will be relatively light today. We will receive consumer price and unemployment rate data from Sweden. Analysts expect the headline CPI to have bounced back to 0.4% in May. We will also receive the industrial production data from Mexico and South Africa. Later the Agriculture Department will release the important WASDE report, which shows estimates of demand and supply in the agricultural sector. At the same time, the Labour department will release the initial jobless claims data from the US while the statistics office will release the PPI data.

EUR/USD

The EUR/USD pair wavered in overnight trading and is now trading at 1.1362, which is below yesterday’s high of 1.1420. On the four-hour chart, the price is above the 50-day and 100-day exponential moving average while the RSI has remained below the overbought level. It also seems to be forming a bullish pennant pattern, which means that the price will likely resume the upward trend.

NZD/USD

The NZD/USD pair declined even after the better-than-expected retail sales numbers. The pair is trading at 0.6496, which is below the day’s high of 0.6583. On the daily chart, the price is above the 61.8% Fibonacci retracement level and above the 100-day and 50-day exponential moving averages. The RSI, which was previously at 78, has dropped to 69, which is a signal that the price will likely continue falling as bears attempt to test the 61.8% retracement at 0.6373.

AUD/USD

The AUD/USD pair dropped to an intraday low of 0.6930, which is lower than yesterday’s high of 0.7067. On the four-hour chart, the price is below the 25-day exponential moving average and slightly above the 50-day EMA. The RSI has moved from the overbought level of 85 to the current 45. As with the NZD/USD pair, the AUD/USD may move lower as bears attempt to move below 0.6900.