This week, the Fed took a slightly more hawkish approach than expected by keeping interest rates steady at 5.00-5.25 but raising the projected terminal rate in the Dot Plot by 50 basis points. The Fed decided to pause and collect more economic data before making a decision about a possible interest rate hike in July. This cautious approach may be justified by the weaker details found in the latest NFP report, the ISM Services PMI report, and the CPI report, although the core readings remain at elevated levels.
Fed Chair Powell said that a hike at the July meeting is an active consideration, but he refrained from making any firm commitments. When the Dot Plot was released, the market quickly bid the US Dollar, but the value returned to its original levels once Powell's press conference started. Overall, this indicates that the Federal Reserve is prepared to take further action to reduce inflation, but their decisions will depend on the economic data. Yesterday, the number of US Jobless Claims once again missed forecasts by a big margin, which may indicate a weakening labour market.
NZDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that once the NZDUSD broke out of the trendline, the pair rallied strongly to the 0.6247 high. The sellers don’t have any strong resistance level to lean onto now while the buyers can start targeting the 0.6389 level. The moving averages have crossed to the upside which should be a signal for more upside incoming. The price has also overstretched a bit as we can see by the distance from the blue 8 moving average. In such instances, we can generally see some consolidation or a pullback into the moving average before the next move.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the red 21 moving average has been acting as dynamic support for the buyers and we can expected it to keep doing so in case we get the pullback. In fact, from a risk management perspective, the buyers should wait for the price to pull back into the 0.6182 support where they will encounter the 21 moving average and also the daily 8 moving average for further confluence. The sellers, on the other hand, will want to see the price breaking below the support zone to pile in and target the 0.6084 level.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is struggling a bit at the 0.6240 high as we head into the weekend. As mentioned earlier, the buyers would be better off to wait for the price to pullback into the 0.6182 support, while the sellers should wait for the price to break below the support zone before piling in for shorts. Eventually, it will depend on the data going forward.
Today, the market will pay special attention to the University of Michigan consumer sentiment report. Last time, the market reacted strongly to this report because long-term expectations for inflation showed a significant increase, going up from 3.0% to 3.2%. However, the number was later adjusted to 3.1%. So, if we see another rise in long-term inflation expectations, it's likely that the value of the dollar will go up. On the other hand, if the data doesn't meet the forecasts, we can expect the dollar to depreciate.
