The recent expectations and eventually the pause in its tightening cycle from the Fed led to a big weakness in the USD that helped the other major currencies to rally. Although the Fed has signalled that two more rate hikes might come in the Dot Plot, the market doesn’t see such a chance due to the recent weakness in the economic data. All else being equal, the Fed might even skip the July hike if the disinflationary trend continues, and the labour market data keeps on weakening.
NZDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the NZDUSD had a pretty strong rally since the first hints of a pause in June from a couple of Fed members. The price has recently broken above the 0.6182 resistance but pulled back as the rally got overstretched. We may now see a classic “break and retest” of the broken resistance turned support and another rally into the 0.63 handle.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has pulled back into support where we can also find confluence with the 38.2% Fibonacci retracement level and the lower bound of the regression channel. This is where we should see the buyers piling in with a defined risk below the Fibonacci level and target the 0.63 level. The sellers, on the other hand, may want to wait for the price to break below the Fibonacci level to get more conviction and target the 0.6085 support.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a downtrend on this timeframe as the moving averages are crossed to the downside and the price is making lower lows and lowers highs. The price has recently pulled back into a previous swing low level where there is also confluence of the red 21 moving average and the trendline. This is where more aggressive sellers should enter the market targeting a break below the support zone and new lows. The buyers, will need to break above this trendline to switch the momentum to the upside and target the 0.63 handle.
This week is pretty bare on the data front with just the US Jobless Claims on Thursday and the US PMIs on Friday. We will also hear from many Fed officials including Fed Chair Powell who’s expected to testify to Congress on Wednesday and Thursday.
