Fundamental Overview
The USD weakened across the board yesterday following the softer than expected US Core CPI data as Treasury yields fell aggressively in what could be the peak in inflation hysteria and repricing in rate cuts expectations.
Strangely enough, the US Dollar eventually erased all the losses and ended the day pretty much flat almost across the board. This was a USD-only reaction as Treasury yields continue to trade around the post-CPI lows while US equities extended the gains.
There’s no clear reason why the US Dollar reacted in such a way. The market pricing shows now 37 bps of easing by year end compared to 31 bps before the US CPI report.
On the NZD side, we haven’t got any key data release from New Zealand yet but as a reminder, the RBNZ cut interest rates by 50 bps as expected at the last meeting. The market continues to price in an 85% chance of a 50 bps cut in February but the total easing for this year was scaled back from 125 bps to 105 bps now.
NZDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that NZDUSD spiked into the major trendline yesterday but got rejected as the sellers stepped in with a defined risk above the trendline to position for a drop into the 2020 lows around the 0.55 handle. The buyers will need the price to break above the trendline to regain control and start targeting new highs.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a support zone around the 0.5585 level where the price got rejected from several times in the past weeks. This is where we can expect the buyers to step in with a defined risk below the support to position for a break above the trendline. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 0.55 handle.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor downward trendline defining the current pullback into the support. The sellers will likely lean on it to keep pushing into new lows, while the buyers will look for a break higher to increase the bullish bets into new highs. The red lines define the average daily range for today.
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