US:
- The Fed hiked by 25 bps as expected and kept everything unchanged at the last meeting.
- Inflation expectations and CPI readings continue to show disinflation with the last two Core CPI M/M figures coming in at 0.16%.
- The US PMIs missed expectations across the board last week.
- Fed Chair Powell’s speech at the Jackson Hole Symposium was mostly in line with what he said previously but he stressed on the need to be careful going forward and that continued strength in the labour market may require further rate hikes.
- ·The first half of the week saw US Job Openings and Consumer Confidence reports missing expectations by a big margin, followed by a miss in the US ADP data and a beat in the US Jobless Claims.
- The market doesn’t expect another hike from the Fed anymore, but a lot will depend on the data going forward.
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 New Zealand Retail Sales beat expectations although remain 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 NZDUSD is testing the key resistance at 0.5987 where we can also find the red 21 moving average for confluence. This is where the sellers are likely to pile in with a defined risk above the resistance to target another lower low. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and target the first swing high around 0.61handle.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we’ve been diverging with the MACD for a long time and this is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the break of the trendline raises the chances of a reversal with the 0.6117 level being the first target, but the buyers will need the price to break above the 0.5987 resistance to confirm the reversal.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a small range between the 0.5987 resistance and the 0.5930 support. A breakout on either side should lead to a sustained and strong move and today’s economic data might be the catalyst.
Upcoming Events
Today the market will be focused on the main release of the week: the US NFP report. We will also have the US ISM Manufacturing PMI an hour and a half later, but the labour market data is the priority right now. A bad reading is likely to weaken the US Dollar in the short term, but if the data is really bad, the market may start to fear the recession and the greenback should come back soon after. A good reading is likely to be linked with the soft-landing scenario and might be bearish for the USD as well. Overall, it’s a mixed picture at the moment as the Fed is expected to pause at the September meeting and we might get much worse economic data before the next meeting in November.
