The FOMC meet next week and markets are expecting a 50 bps rate hike from the Fed as well as QT being announced. The Fed are also widely expected to announce another 50 bps rate hike to come. So, this means the bar is set very high for the fed to surprise markets and send the USD even higher.
With so much bullish expectations priced in a ‘buy the rumour sell the fact response’ may be the path of least resistance for the USD next week.
One interesting pair to look at for next month is the NZD/USD. Over the last 22 years the pair has risen 14 times. If the Fed fail to give reasons for more USD strength then the NZD/USD could gain as the RBNZ are still on their hawkish rate path cycle.
Over the last 22 years, between May 17 and June 10, the NZD/USD has risen 14 times. It has had an average return of over 1.5%. The maximum gain was nearly 10% in 2020 and the largest loss was in 2008’s global financial crisis with more than a 2.5% loss.
Will the NZD/USD pair rise again this year?
Remember, don’t just trade it, Seasonax it!