US:
- The Fed left interest rates unchanged as expected at the last meeting.
- The macroeconomic projections were revised higher as the economy showed much stronger resilience than expected and the Dot Plot showed that the majority of members still expects another rate hike by the end of the year with less rate cuts in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully.
- The latest US Core PCE came in line with expectations with disinflation continuing steady.
- The labour market remains fairly solid as seen last week with another strong beat in Jobless Claims and the NFP report.
- The ISM Manufacturing PMI beat expectations while the ISM Services PMI came in line with forecasts in another sign that the US economy remains resilient.
- The Fed members continue to cite elevated long term yields as a reason to proceed carefully.
- The market doesn’t expect the Fed to hike anymore.
New Zealand:
- The RBNZ kept its official cash rate unchanged while stating that demand growth continues to ease and it’s expected to decline further with monetary conditions remaining restrictive.
- The recent New Zealand inflation and employment data surprised to the upside but the PMIs continue to slide further into contraction.
- The wage growth has also missed expectations and it’s something that the central banks are watching closely.
- The recent 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 as well.
NZDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the NZDUSD pair bounced near the bottom of the range around the 0.5860 level and rallied strongly into new highs breaking out of the range. The price is now pulling back as it got overstretched as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price action within the range has been messy without clear levels to lean on. The price might now come back to the resistance turned support around the 0.60 handle in what could end up being a “break and retest” pattern. We can also see that we have some strong confluence around the support zone where we can find the upward trendline, the red 21 moving average and the 50% Fibonacci retracement level. This is where the buyers are likely to step in with a defined risk below the trendline to position for another rally into the 0.6117 resistance. The sellers, on the other hand, will want to see the price breaking lower to pile in and extend the drop into the lows.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the latest leg higher diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. This might be a good confirmation signal that the NZDUSD pair might indeed pull back to the support zone around the 0.60 handle where buyers will look for a bounce, while the sellers will look for a break.
Upcoming Events
This week the market is likely to focus on the US CPI report as that’s what might change the expectations around the next FOMC rate decision. Today, we will see the US PPI data and later in the day the FOMC Meeting Minutes. Tomorrow, it will be the time for the US CPI report, and at the same time we will also get the latest Jobless Claims figures, while late in the evening we’ll also get the New Zealand Manufacturing PMI data. On Friday we conclude the week with the University of Michigan Consumer Sentiment report.
