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.
- Inflation measures since then showed further disinflation.
- The labour market displayed signs of softening although it remains fairly solid.
- Overall, the economic data started to surprise to the downside lately.
- Last week the ISM Services PMI and Jobless Claims surprised to the upside.
- The Fed members are leaning more towards a pause in September.
- The market doesn’t expect the Fed to hike at the September meeting, but there’s now a 50/50 chance of a hike in November.
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.
- 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 the recent bounce in the NZDUSD pair is struggling at the red 21 moving average where the sellers are likely to be stepping in to position for further downside. The bearish momentum seems to be waning and we might see a bigger correction into the 0.60 handle. If the US data comes out much stronger than expected though, the pair should keep on depreciating.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the target for the pullback should be the 0.60 resistance, but the buyers will need to break above the 0.5930 level to start targeting the 0.60 handle. In fact, we can expect the buyers to pile in around the 0.59 handle where we have also the confluence with the red 21 moving average. If the price breaks through the support though, the sellers are likely to extend the drop into the 0.5860 low.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see clear support and resistance levels. The buyers should buy the supports, while the sellers should sell the resistances. The current price action into the 0.5900 support seems to be forming a bullish flag pattern, so that will also be something to watch.
Upcoming Events
This week we have many important events beginning with the US CPI tomorrow, which is expected to show an increase in headline inflation but further disinflation in the core measure. On Thursday, we will see the US Jobless Claims, PPI and Retail Sales data. Finally on Friday, we get the University of Michigan Consumer Sentiment report.
