The Fed hiked interest rates by 25 bps as expected and kept the policy statement unchanged. The market was looking for clues and hints on the next policy path, but it didn’t get anything. In fact, Fed Chair Powell just reaffirmed their data dependency. Yesterday though, the US Jobless Claims beat expectations again by a big margin sending the USD higher. As long as the US data remains this strong, the USD should continue to appreciate.
The RBNZ, on the other hand, kept its official cash rate unchanged while stating that it will remain at the restrictive level for the foreseeable future to ensure that inflation comes down back to target. The recent New Zealand inflation data though surprised to the upside which might put some pressure on the central bank at the next rate decision, although they are more likely to keep rates steady.
NZDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that NZDUSD sold off strongly from the key 0.6389 resistance and it’s now likely targeting the 0.5987 low. The moving averages have crossed to the downside again as the bearish momentum prevails and the sellers remain in control supported by stronger US data.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we recently got a fakeout around the 0.6230 resistance. In fact, the price continued to rally past the resistance zone and the 38.2% Fibonacci retracement level and then got smacked back down by the strong US Jobless Claims. The price has broken below a counter-trendline, and the moving averages crossed to the downside again. This is a bearish signal, and the sellers should pile in aggressively in case the price pulls back.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor downward trendline where the sellers can lean onto to position for another fall. From a risk management perspective, if the price pulls back to the orange 38.2% Fibonacci retracement level, the sellers will have a better risk to reward setup and have the red 21 moving average and the 0.62 handle for confluence. The buyers, on the other hand, may start to pile in already in case the price breaks above the minor trendline, but they will need the price to break above the 0.6240 resistance zone to get back in control and target the highs.
Upcoming Events
Today the market will be focused on the US PCE and ECI reports. The PCE is less likely to be market moving given that is less timely than the CPI, so it will need a big surprise to trigger a notable reaction. In fact, the Employment Cost Index (ECI) is likely to be more important given the Fed’s focus on wage inflation and the strength in the labour market. Higher than expected data should be bullish for the USD, while lower than expected figure should be bearish in the short term.
