NZD/USD hit 5.5 month low, eyes Fed

• The USD remains bid as US rate ceiling rises.
• NZD/USD hit lowest since Oct. 10.

The NZD/USD fell to 0.7167 in Asia - the lowest since Oct. 10, as end-2019 Fed Funds futures rose above 2.5 percent for the first time, suggesting the markets are expecting a higher terminal rate (neutral rate).

Focus on the Fed

The Fed will likely raise rates by 25 basis points and reaffirm the plan to gradually reduce the size of its balance sheet. Also, investors believe the Fed may revise higher its dot plot to four 2018 rate hikes.

However, a sustained rally in the greenback is likely only if the Fed pushes up the neutral rate (revises higher the 2018/19 rate forecasts).

The Fed rate decision is due at 18:00 GMT and will be followed by a press conference, scheduled at 18:30 GMT.

NZD/USD Technical Levels

As of writing, the spot is trading at 0.7175. A break below the immediate support of 0.7126 (100-day moving average) would open doors for 0.71 (psychological support) and 0.7073 (Jan. 3 low). On the other hand, a move above 0.7183 (200-day MA) could yield a re-test of 0.7212 (50-hour MA) and 0.7258 (10-day MA).