Fundamental Overview
The main culprit for the US Dollar strength lately has been the rally in long term Treasury yields. The yield curve has been bear-flattening which is what you would expect with higher growth and potentially higher inflation expectations.
There’s a good argument that the markets have been already positioning for a Trump’s victory which is expected to strengthen the higher growth and less rate cuts expectations.
As previously mentioned, this is the trend for now and it’s generally a bad idea to fight such trends without a strong catalyst. The US Dollar will likely remain supported unless Harris wins the US elections and we get a correction in Treasury yields.
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 22% 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 broke below the key 0.6050 support zone and extended the drop into new lows. From a risk management perspective, the sellers will have a better risk to reward setup around the support turned resistance, while the buyers will want to see the price breaking higher to start targeting the 0.6217 resistance next.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a downward trendline defining the current bearish momentum. The sellers will likely lean on it to position for new lows, while the buyers will look for a break higher to increase the bullish bets into new highs.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price broke above another minor trendline that was defining the bearish momentum on this timeframe. The rally stalled at the most recent swing high around the 0.60 handle.
The buyers will want to see the price breaking above this level to increase the bullish bets into the major trendline, while the sellers will likely step in around this level to position for new lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the US ADP and the US GDP. Tomorrow, we have the US PCE, the US Jobless Claims and the US Employment Cost Index. Finally, on Friday, we conclude the week with the US NFP and the US ISM Manufacturing PMI.
