Fundamental Overview
The weak US NFP report last Friday led to a key breakout in the USDJPY pair which eventually triggered another deleveraging in the Yen carry trades. Things got dire yesterday as the Nikkei dropped 12% overnight and we saw a general selloff in global stock markets.
This led to risk-off flows and at one point, the markets saw the Fed cutting rates by 136 bps by year-end and some chances of an emergency rate cut. Although the volatility calmed down a bit, the markets are still expecting a 50 bps cut by the Fed in September and a total of 110 bps by year-end.
The NZD got pressured by the risk-off sentiment but bounced back pretty quickly erasing all the losses since last Friday. On the monetary policy front, the last RBNZ policy decision weighed on the Kiwi as the central bank changed slightly its language to a more dovish leaning which increased the rate cuts expectations.
Tomorrow, we get the New Zealand Jobs report and if we get weak data, the market will likely increase the chances of a rate cut at the upcoming meeting which at the moment stands at 35% probability.
NZDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that NZDUSD spiked back lower to the April’s lows at 0.5850 yesterday but eventually erased all the losses. The buyers are clearly stepping in around the 0.5850 level to position for a rally back into the 0.6050 resistance. The sellers will need the price to break below the 0.5850 level to increase the bearish bets into the 0.5770 level next.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor resistance zone around the 0.5980 level where the price got rejected from several times. The buyers will want to see the price breaking higher to increase the bullish bets into the 0.6050 resistance next. The sellers, on the other hand, will likely continue to lean on that minor resistance with a defined risk above it to keep pushing into new lows.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have mostly a rangebound price action with the price now trading in the middle of the two key levels. There’s not much to do here other than waiting for the breakouts or some catalyst. The red lines define the average daily range for today.
Upcoming Catalysts
This week is basically empty on the data front. The only notable economic releases will be the New Zealand Jobs report tomorrow and the US Jobless Claims figures on Thursday. The market will also pay close attention to Fed members’ comments given the latest developments in the markets.
