Last week, the US CPI came basically in line with expectations, but the good news is that the Core M/M reading once again printed at 0.2%. The less good news is that the US Initial Claims spiked higher, but Continuing Claims remained solid. We have already seen Claims spiking higher in the past months, so it shouldn’t be worrying yet. The long-term inflation expectations in the University of Michigan report ticked lower, so on the data side the soft-landing narrative was supported. The US Dollar, nonetheless, appreciated across the board as the attention may have turned already on the next data given the higher energy prices and China starting to stimulate more.
The RBNZ, on the other hand, kept its official cash rate unchanged 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 yesterday plunging into contraction. Overall, it’s a mixed picture for the RBNZ but should be enough to keep rates steady.
NZDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that NZDUSD broke below the last low at 0.5987 and this has opened the door for a fall towards the 0.5514 level as there’s no strong support until then. The bias remains clearly bearish as the price keeps printing lower lows and lower highs and the moving averages remain crossed to the downside.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has recently pulled back into the trendline and got rejected as the sellers stepped in with a defined risk just above it. If we see another pullback, we can expect the sellers to lean on the trendline again. In fact, the buyers will need a break above the trendline to switch the bias to the upside and get more conviction to target new higher highs.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that at the moment the price is consolidating just beneath the 0.5987 level as the market is awaiting the economic data. A break to the upside should see the buyers piling in and target the trendline, while a break lower should lead to more bearish pressure.
Upcoming Events
This week is a bit empty on the data front but we will still have some top tier economic data and the RBNZ Policy Decision tomorrow. Today, we will see the latest US Retail Sales report with strong data expected to support the USD while weak figures likely to weigh on the greenback in the short-term. Tomorrow, the RBNZ is expected to keep its policy rate unchanged, so the market will focus more on clues on what’s next. On Thursday, we have the US Jobless Claims. A big miss in Claims data should trigger some recessionary fears and send the market into risk-off ultimately weighing on the NZD and supporting the USD. On the other hand, strong data may even lead the market to expect the Fed to keep with its hawkish stance and support the US Dollar as well.