US:
- The Fed left interest rates unchanged as expected.
- The macroeconomic projections were revised higher as the economy showed much stronger resilience than expected and the Dot Plot showed that the majority of members still expects another rate hike by the end of the year with less rate cuts in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully as they are trying to find the optimal level of rates. Powell also added that the soft landing is not the base case at the moment, although they are aiming for it.
- The latest US CPI came in line with expectations, so the market’s pricing remained roughly the same.
- The labour market displayed signs of softening although it remains fairly solid as seen also last week with the strong beat in Jobless Claims.
- The market doesn’t expect the Fed to hike again at the moment.
New Zealand:
- The RBNZ kept its official cash rate unchanged at the last meeting 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 and employment data surprised to the upside but the PMIs continue to slide further into contraction.
- The wage growth has also missed expectations and it’s something that the central banks are watching closely.
- The recent New Zealand Retail Sales beat expectations although the data remains deeply negative.
- The RBNZ is expected to keep the cash rate steady at the next meeting.
NZDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the NZDUSD pair has retraced all the way back to the key resistance around the 0.60 handle and sold off as the USD got another boost from both the more hawkish than expected FOMC dot plot and economic data. The trend remains bearish, although the recent moving average crossover could be an early sign of bottoming.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the divergence with the MACD of the last leg lower signalled a weakening in momentum and it’s generally followed by pullbacks or reversals. In this case, we got a pullback to the resistance, while a break above it would confirm a reversal and take the NZDUSD to the next resistance around the 0.6117 level. At the moment, the price is testing a trendline where we can expect the buyers to step in with a defined risk below it to position for another rally into the resistance and target a breakout. The sellers, on the other hand, will want to see the price breaking lower to pile in even more and target a new low.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the sellers will have two options to short the pair in case of a bounce on the trendline. The first one will be around the 0.5940 support turned resistance where there’s also the 38.2% Fibonacci retracement level. The second one will be around the downward trendline with the 61.8% Fibonacci retracement level for confluence. The buyers, on the other hand, will want to see the price breaking above the downward trendline to pile in even more and target the breakout of the resistance at 0.60.
Upcoming Events
Tomorrow we will see the latest US Jobless Claims data, which continues to be very important for the Fed and the market. Strong data should keep on supporting the USD, while weak readings are likely to weigh on the greenback in the short term. On Friday, we conclude the week with the latest US PCE report.