On the daily chart below for NZDUSD, we can see that since March, the market hasn’t moved much as the price action remained rangebound with just one spike higher when the RBNZ surprised with a higher than expected hike. There’s clearly uncertainty in this market with one side betting on a recession or higher rates in favour of the USD and the other betting on a soft landing in favour of the NZD.

The recent economic data though hasn’t been good. In fact, last Friday the US Retail Sales missed expectations across the board and sent the USD higher as the recession vibes returned. Moreover, the move lower was given an extra boost by the 1 year inflation expectations in the University of Michigan survey showing a big jump to the upside.

NZDUSD technical analysis

On the 4 hour chart below, we can see the big long range that began in March after the Silicon Valley Bank collapsed and caused a little banking crisis. As a consequence, the market priced in rate cuts by the end of the year and the US Dollar weakened. That was the interest rates trade.

Now, the market may be switching to the recession trade, which is when the USD appreciates as a safe haven. There’s not much to do with this range other than buying at support and selling at resistance until the price breaks out supported by a fundamental catalyst.

On the 1 hour chart below, we can see that the miss in US Retail Sales caused a big selloff with the price falling all the way back to the bottom of the range. The pullback afterwards seems to have ended as the price broke below the short-term trendline and it’s now eyeing again the bottom of the range.

The buyers should be waiting there with a defined risk below the range targeting the top. The sellers, on the other hand, will want to see the price breaking out to pile in and target the low at 0.6084. The economic data to watch are the US Jobless Claims tomorrow and US PMIs on Friday.