US:
- The Fed hiked by 25 bps as expected and kept everything unchanged at the last meeting.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- The US CPI this week 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.
- Last week the ISM Services PMI and Jobless Claims surprised to the upside, which point to a resilient economy overall.
- Yesterday, we got yet another beat in Jobless Claims followed by strong Retail Sales and PPI data.
- The Fed members are leaning more towards a pause in September and the next decision will still be dictated by the economic data.
- The market doesn’t expect the Fed to hike at the September meeting and there’s just a 33% chance of a hike in November, although that can change if the data keeps on running hot.
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 are in contraction with the Services PMI recently plunging into contraction.
- The wage growth has also missed expectations and it’s something that the central banks are watching closely for second round effects.
- The New Zealand Retail Sales beat expectations although the data remains deeply negative.
- Today, the Manufacturing PMI showed further contraction.
- 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 NZDUSD has been diverging with the MACD since the breakout and this is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we are seeing a pullback with the sellers leaning on the red 21 moving average to position for another selloff. If the price breaks above the moving average, we can expect the sellers to pile in around the 0.5987 resistance which would give them an even better risk to reward setup.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price action has been choppy but the pair is trading between key levels with an upward tilt given that the price has been printing higher highs and higher lows with the moving averages being crossed to the upside. A break above the 0.5930 resistance should lead to a rally into the 0.5987 resistance, while a break below the 0.5892 support should result in a fall into new lows.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the short term price action between the key levels. We now have a range between the 0.5930 resistance and the 0.5892 support. A break to the upside is bullish, while a break to the downside is bearish.
Upcoming Events
Today the only notable report left to be released for this week is the University of Michigan Consumer sentiment survey. Consumer sentiment might have deteriorated given higher energy prices and that might have filtered to higher inflation expectations.
