USD

  • The Fed left interest rates unchanged as expected with a shift in the statement that indicated the end of the tightening cycle.
  • The Summary of Economic Projections showed a downward revision to Growth and Core PCE in 2024 while the Unemployment Rate was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts in 2024 compared to just two in the last projection.
  • Fed Chair Powell didn't push back against the strong dovish pricing and even said that they are focused on not making the mistake of holding rates high for too long, which implies a rate cut coming soon.
  • The US CPI last week came in line with expectations with the disinflationary progress continuing steady. This was also confirmed by the US PPI the day after where the data missed estimates.
  • The labour market has been showing signs of weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming in strongly.
  • The US Retail Sales last week beat expectations across the board as consumer spending continues to hold.
  • The latest ISM Manufacturing PMI missed expectations falling further into contraction, while the ISM Services PMI beat forecasts holding on in expansion.
  • The market expects the Fed to start cutting rates in Q1 2024.

NZD

  • The RBNZ kept its official cash rate unchanged at the last meeting while stating that demand growth continues to ease and it’s expected to decline further with monetary conditions remaining restrictive.
  • The New Zealand inflation data missed expectations supporting the RBNZ’s stance.
  • The latest labour market report showed a notable increase in the unemployment rate and a slowdown in wage growth which is something that will keep the RBNZ on the sidelines.
  • The Manufacturing PMI fell further into contraction followed by the Services PMI which fell back into contraction.
  • The market expects the RBNZ to start cutting rates in Q3 2024.

NZDUSD Technical Analysis – Daily Timeframe

NZDUSD Technical Analysis
NZDUSD Daily

On the daily chart, we can see that NZDUSD surged to new highs following the surprisingly dovish FOMC decision and it’s now testing a key trendline. This is where we can expect the sellers to step in with a defined risk above the trendline to position for a pullback into the upward trendline and eyeing a break lower. The buyers, on the other hand, will want to lean on the upward trendline where they will find the 21 moving average for confluence.

NZDUSD Technical Analysis – 4 hour Timeframe

NZDUSD Technical Analysis
NZDUSD 4 hour

On the 4 hour chart, we can see that in case of a pullback the buyers will also find the 50% Fibonacci retracement level around the trendline for further confluence. From a risk management perspective, the buyers will have a much better risk to reward setup around the upward trendline to target the 0.64 handle. The sellers, on the other hand, will want to see the price breaking below the trendline to invalidate the bullish setup and increase the bearish bets into the 0.6050 support.

NZDUSD Technical Analysis – 1 hour Timeframe

NZDUSD Technical Analysis
NZDUSD 1 hour

On the 1 hour chart, we can see that the pair is diverging with the MACD right at the key trendline. This is generally a sign of weakening momentum often followed by pullbacks or reversals. Some aggressive buyers might want to lean on the minor upward trendline to position for a breakout to the upside and target the 0.64 handle. The sellers, on the other hand, will want to see the price breaking below the trendline to confirm the reversal and target the 50% Fibonacci retracement level.

Upcoming Events

This week is a bit empty on the data front as we head into the Christmas holidays. Today, we have the US Consumer Confidence report. Tomorrow, we get the latest US Jobless Claims data, while on Friday we conclude the week with the US PCE report.