Fundamental Overview
The USD continues to reign supreme despite the lack of catalysts. The main culprit for the recent strength in the US Dollar has been the rally in long term Treasury yields. The yield curve is bear flattening which is what you would expect with higher growth and potentially higher inflation expectations.
The catalyst for this was of course the latest FOMC decision and the US NFP report added fuel to the fire. There’s also been a good argument that the markets are already positioning for a Trump victory which is expected to strengthen the higher growth and less rate cuts expectations.
For now, this is the trend and it’s generally a bad idea to fight such trends without a catalyst. Unfortunately, we don’t have much left for October as the main events will be in the first weeks of November when we will get the top tier economic reports, the US elections and the FOMC decision.
On the NZD side, the latest New Zealand Q3 CPI missed expectations solidifying the market’s view for another 50 bps cut at the upcoming meeting and even pricing 26% chance of a 75 bps move. In 2025, the market expects four more 25 bps cuts.
NZDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that NZDUSD is slowly breaking below the key 0.6050 support zone. The bearish momentum has slowed down, but the sellers will likely pile in around these levels to keep pushing into the 0.5850 level next. The buyers, on the other hand, will want to see a bounce to start targeting the 0.6217 resistance.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the recent price action has formed a falling wedge which is generally a signal of a loss of momentum and potential reversal. The sellers will want to see the price breaking below the bottom trendline to increase the bearish bets into new lows. The buyers, on the other hand, will look for a break above the top trendline to pile in for a rally into the 0.6217 resistance.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much more we can add as buyers and sellers will look for breakouts. Nonetheless, we can expect some aggressive buyers to step in around the bottom trendline to position for a rally into the top trendline. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we get the US Flash PMIs and the US Jobless Claims figures.