Fundamental Overview
The USD got a boost yesterday following an ugly US ISM Manufacturing PMI as the markets went into risk-off. Overall, we had goldilocks data releases until now with an economy that’s been slowing but still growing. So, one bad report might not be a gamechanger, but the markets are increasingly sensitive to bad news in this part of the cycle.
On the monetary policy front, we had the FOMC rate decision on Wednesday and as expected it was a dovish one. Fed Chair Powell hinted to a September rate cut and didn’t even close the door for “several” rate cuts before the end of the year. The market has now fully priced in three rate cuts by the end of the year and continues to raise the chances of a 50 bps cut in September.
The NZD, on the other hand, has been on a steady fall as we got the unwinding of the Yen carry trades and general risk-off sentiment. On the monetary policy front, the last RBNZ policy decision weighed on the Kiwi as the central bank changed slightly its language to a more dovish leaning which increased the rate cuts expectations.
NZDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that NZDUSD bounced around the April’s lows at 0.5850 and extended the gains into the 0.5980 level before pulling back on weak US data and general risk-off moves.
From a risk management perspective, the sellers will have a much better risk to reward setup around the 0.6050 resistance zone where we can also find the confluence of the trendline and the 61.8% Fibonacci retracement level. The buyers, on the other hand, will want to see the price breaking above that strong resistance to increase the bullish bets into the 0.6217 level next.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor trendline defining the recent bullish momentum. The buyers will likely keep on leaning on it to position for the continuation of the rally into the 0.6050 resistance zone. The sellers, on the other hand, will want to see the price breaking lower to position for a drop back into the 0.5850 lows.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have also the 50% Fibonacci retracement level adding confluence to the trendline. This 0.5930 support zone will be key in the short-term as a strong bounce will likely lead to a rally into the major resistance, while a break lower should take the pair back to the 0.5850 lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US NFP report where the consensus expects 175K jobs added in July and the Unemployment Rate to remain unchanged at 4.1%.
