US:
- The Fed hiked by 25 bps as expected and kept everything unchanged.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- The US economic data keeps on surprising to the upside, but inflation expectations and CPI readings continue to show disinflation with the last two Core CPI M/M figures coming in at 0.16%.
- At the moment, the market doesn’t expect another hike from the Fed, but the next NFP and CPI data will be crucial to confirm or change this view.
New Zealand:
- The RBNZ kept its official cash rate unchanged 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 last week 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 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 after breaking below the May low and extending to the downside some more, the NZDUSD started to pull back into the broken level in what could end up being a classic “break and retest” pattern. In fact, we can expect the sellers to pile in around the 0.5987 level with a defined risk above the level to target new lows with the ultimate target standing at 0.5514.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has been diverging with the MACD for a while and this is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we are in fact seeing a pullback into the resistance where we can find the confluence with the downward trendline and the 38.2% Fibonacci retracement level.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is indeed rallying towards the 0.5987 resistance area where we are expecting the sellers to pile in strongly and restart the downtrend. The buyers, on the other hand, will want to see the price breaking above the resistance to have more conviction on the upside and start targeting new highs with the 0.61 handle as the first target. More conservative sellers may want to wait for the price to break below the counter-trendline before joining the downtrend.
Upcoming Events
This week is pretty empty on the economic data side as we will only have the PMIs tomorrow and the US Jobless Claims on Thursday. Given the strong appreciation in the US Dollar seen in the past weeks, we can expect some USD weakness if the data misses expectations, and we will likely need much stronger than expected readings to see another sustained rally in the greenback. Remember also that this is the Jackson Hole Symposium week, so we will hear from many central bankers including Fed Chair Powell, who is set to speak on Friday.