Fundamental Overview
The USD got a boost from the strong US Consumer Confidence data which triggered an aggressive rise in long term Treasury yields. The report however just showed that the labour market remains resilient which is good news for growth and not necessarily bad news for inflation. The greenback benefited also from the risk-off sentiment which looks increasingly likely that it was caused more by the month-end flows rather than a fundamental driver.
The NZD, on the other hand, remains supported from the hawkish RBNZ decision where the central bank pushed further out the timing for a rate cut and even added that they considered a rate hike. Moreover, the risk-on sentiment is supportive for commodity currencies like the NZD, so if it this were to continue, we could see even more gains ahead for the Kiwi.
NZDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that NZDUSD continues to consolidate in a roughly 60 pips range as traders await a breakout to get things going. The price recently fell below the trendline which increased the risk of a bigger correction to the downside, although the price will need to break below the 0.6080 level to confirm it and see the bearish momentum increasing. For now, the buyers remain in control with the 0.6218 level being the first target.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that more clearly the rangebound price action with the latest bounce on the 0.6084 support as the risk mood improved yesterday with falling Treasury yields. It looks increasingly likely that the price action of the past couple of days was caused mainly by month-end flows.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we got a breakout recently but all the gains were erased as the risk sentiment soured. The buyers stepped in again around the support to position for another breakout and target the 0.6218 level. The sellers, on the other hand, will likely pile in around the resistance to position for a drop back into the support and target a break lower. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US PCE report. This report is unlikely to change anything for the Fed as the central bank remains in a “wait and see” mode. If we get a good report though (or even in line), we might see the risk-on sentiment coming back. On the other hand, hotter than expected figures might weigh on the sentiment a bit.