NZDUSD Technical Analysis – The Kiwi benefits from the USD weakness

Basic Overview

The US dollar remains under pressure amid positive risk sentiment and an impending rate cut by the Fed that should help global growth. These factors are generally bearish drivers for the US dollar.

In fact, the recent strong rally in the New Zealand dollar has been driven mostly by the US dollar side of the equation. Following the Reserve Bank of New Zealand’s more dovish than expected decision, the market is pricing in a 95% chance of an October rate cut and at least another 25bp cut before the end of the year.

Focus will now be on the US preliminary PMIs due out tomorrow, followed by Fed Chair Powell’s speech at the Jackson Hole symposium on Friday.

NZDUSD Technical Analysis – Daily Time Frame

On the daily chart, we can see that the NZD/USD pair has finally broken through the key resistance area around 0.6050 this time and the gains have extended to 0.6150. Here we can expect sellers to step in with a defined risk above the level to position themselves for another drop to the 0.6050 support level. On the other hand, buyers will want to see the price rise higher to increase bullish bets to the 0.6217 resistance level.

NZDUSD Technical Analysis – 4-hour timeframe

On the 4-hour chart, we can see that we have a very strong support area around the 0.6050 level where we can find the confluence of the trend line and the 61.8% Fibonacci retracement level. If the price reaches there, we can expect buyers to step in with a specific risk below the support to position a suitable position to rise to new highs with a better risk-reward setup. On the other hand, sellers will want to see the price drop lower to increase bearish bets to new lows.

NZDUSD Technical Analysis – 1-Hour Timeframe

On the 1-hour chart, we can see that we broke a slight uptrend line today that has been defining bullish momentum since the 0.60 level. This could be a sign of a pullback in momentum, so buyers are likely to wait for a bigger pullback or catalyst before resuming the uptrend. The red lines mark the average daily range for today.

Upcoming incentives

Tomorrow we get US jobless claims and US PMIs. On Friday we wrap up the week with Fed Chairman Powell speaking at the Jackson Hole Symposium.