Less than half a month remains until the FED’s critical June meeting when the forecast will be updated. In recent weeks, despite the hawkish narrative from FED members and the FOMC minutes, the dollar index has not gained upside momentum. This has helped the NZDUSD make a run towards the downtrend line again. The hawkish RBNZ discussed raising rates, likely to signal to the markets that high rates are likely to stay. The two-year government bond yield of New Zealand has risen relative to the US’s in recent weeks, which was also one of the reasons for the recent run of NZDUSD. However, this week’s GDP and PCE data from the US have the power to change the current momentum ahead of the FOMC meeting. 

(NZDUSD Weekly Chart) 

The downtrend has been in play since the top in early 2021 and will likely create substantial resistance, with the support of the Fibonacci 38.2% level being so close to it. Despite the recent run of NZDUSD, the dollar index is entering a key period with incoming data and the FOMC meeting. There is a high possibility that the three-year-long trend will hold for now without being broken. However, recent moves from China and internal dynamics in New Zealand support a possible break. This might occur if the incoming GDP, PCE, and payrolls data fail to satisfy US dollar bulls. 

If the trend holds in the coming two to three weeks, NZDUSD might begin to retreat below 0.60 or even target 0.55 in the coming months. On the other hand, a break of the three-year period might open the door to the midpoint of the 2021-2022 retreat, which is at 0.6488.