Basic overview
Last week, the US dollar lost strength across the board after the weak US CPI report, with the market cutting interest rates twice by the end of the year. The moves were reversed soon after as we got a slightly tougher than expected decision from the FOMC as the chart showed the Fed expecting only one cut for the year despite a weak US CPI report.
Fed Chairman Powell backed off the forecast, making it a bit less worrisome as the central bank remains heavily data-driven. The US dollar rally finally gained steam as risk sentiment became more cautious.
On the other hand, the New Zealand dollar was under pressure due to risk-off sentiment and the strength of the US dollar. Moreover, today's services PMI came in very weak which weighed on the New Zealand dollar in the Asian session.
Technical Analysis of NZDUSD – Daily Time Frame
NZDUSD daily
On the daily chart, we can see that the NZD/USD pair rose to the key resistance level at 0.6217 after the weak US CPI report and then sold off after the hawker than expected FOMC decision. We have strong support around the 0.6082 level where we also have the 38.2% Fibonacci retracement level to meet.
This is where we can expect buyers to step in with specific risks below the support level to put them in a position to rally to new highs with a better risk to reward setup. On the other hand, sellers will want to see the price break down to increase bearish bets to the 0.60 handle next.
Technical analysis of NZDUSD – 4-hour time frame
NZDUSD 4 hours
On the 4-hour chart, we can see that the price action was mostly confined between the 0.6082 support and 0.6217 resistance levels. These will be the key levels that the market will likely need to break to start a more sustainable trend. For now, the bounce could continue as the market waits for new catalysts.
Technical analysis of NZDUSD – 1 hour time frame
NZDUSD 1 hour
On the 1-hour chart, we can see that from a risk management perspective, sellers have a good resistance area around the 0.6142 level where they will also find the confluence of the trend line and the 38.2% Fibonacci retracement level.
On the other hand, buyers will want to see the price break higher to gain some conviction and start targeting a breakout above the 0.6217 resistance level. The red lines mark the average daily range for the day.
Upcoming stimuli
Tomorrow we have US retail sales and US industrial production. On Thursday, we will release New Zealand's GDP, and later in the day, US housing developments, building permits and US unemployment claims figures will be released. On Friday, we conclude the week with US PMIs.