USD

  • The Fed left interest rates unchanged as expected at the last meeting 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.
  • The latest US PCE missed expectations across the board with the Core 6-month annualised rate falling below the Fed’s target at 1.9%.
  • The labour market has been softening via less job opportunities rather than more layoffs with the US Job Openings yesterday missing expectations and the inside data painting an even weaker picture.
  • The ISM Manufacturing PMI yesterday beat expectations although it continues to remain in contraction.
  • 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 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 Q2 2024.

NZDUSD Technical Analysis – Daily Timeframe

NZDUSD Technical Analysis
NZDUSD Daily

On the daily chart, we can see that NZDUSD reached the key resistance zone around the 0.64 handle and fell into the trendline. The pair bounced yesterday as the buyers piled in given that they also had the confluence with the red 21 moving average and the 50% Fibonacci retracement level. The target should be the 0.64 handle with a breakout as the ultimate goal.

NZDUSD Technical Analysis – 4 hour Timeframe

NZDUSD Technical Analysis
NZDUSD 4 hour

On the 4 hour chart, we can see more closely the bounce on the trendline with the price coming into the 21 moving average and rejecting it. The buyers will need the pair to break above the moving average to get some more confirmation for a rally into 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 position for a drop into the 0.61 support.

NZDUSD Technical Analysis – 1 hour Timeframe

NZDUSD Technical Analysis
NZDUSD 1 hour

On the 1 hour chart, we can see that the latest leg lower diverged with the MACD right at the key trendline. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got the pullback into the swing high around the 0.6275 level where we had the confluence with the 38.2% Fibonacci retracement level and the 4-hour 21 moving average. This is where the sellers stepped in to position for a break below the trendline.

Upcoming Events

Today we will have another slate of US labour market data with the release of the US ADP and Jobless Claims figures. Tomorrow, we conclude the week with the NFP report and the ISM Services PMI.