Fundamental Overview
The NFP report on Friday gave the USD a boost as the data under the hood was better than feared. The probabilities for a 50 bps cut decreased as a result and they are now standing around 27%.
A soft US CPI report tomorrow might increase those probabilities a little bit, but we will still head into the FOMC decision with a 25 bps cut as the most probable scenario.
Nevertheless, the trend in the labour market remains skewed to the downside and time will tell if the Fed’s cuts will be enough to stop this trend.
For the Fed, the market sees a 73% probability of a 25 bps cut at the upcoming meeting and a total of 110 bps of easing by year-end. For the RBNZ, there’s a 78% chance of a 25 bps cut at the upcoming meeting with a total of 80 bps of easing expected by year-end.
NZDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that NZDUSD broke below the key 0.6217 level and extended the drop into the 0.6127 level. The price is now right in the middle of two key levels. The sellers will want to see a pullback into the 0.6217 resistance to position for a drop into the 0.6050 level next with a better risk to reward setup. The buyers, on the other hand, will want to see the price breaking higher to position for a rally into the 0.6370 level.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the bearish momentum has lost some momentum near the swing level around the 0.6127 level. This is where we can expect the buyers to step in with a defined risk below the level to position for a rally into the 0.6217 resistance. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 0.6050 level.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor resistance around the 0.6160 level which created a tight range with the 0.6127 support. The buyers will want to see the price breaking higher to increase the bullish bets into the 0.6217 resistance, while the sellers will look for a break lower to position for a drop into the 0.6050 level. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US Small Business Optimism Index. Tomorrow, we get the US CPI report. On Thursday, we have the latest US Jobless Claims figures and the US PPI data. On Friday, we conclude the week with the University of Michigan Consumer Sentiment report.