Basic Overview
The US dollar fell broadly last week after another weak US CPI report and positive jobless claims numbers. The market has not only priced in a September rate cut, but has also started to price in some chances of a back-to-back rate cut in November.
Overall, we had good data with an economy that is slowing but still growing. This should support the soft landing narrative and be positive for risk sentiment.
On the other hand, the New Zealand dollar continues to find support against the US dollar mainly due to risk sentiment as US data continues to support at least two more rate cuts by the Federal Reserve without sending recession signals.
On the monetary policy front, the Reserve Bank of New Zealand’s decision last week weighed on the New Zealand dollar, as the central bank slightly changed its language to a more dovish slant, increasing the chances of a rate cut at the next meeting, with the market now assigning a 53% probability to such a move.
NZDUSD Technical Analysis – Daily Time Frame
NZDUSD Daily Currency Pair
On the daily chart, we can see that the NZD/USD pair failed to extend gains after bouncing off the strong support area around 0.6050 last week as the RBNZ’s surprisingly dovish decision weighed on the Kiwi. If the price drops to the support area again, we can expect buyers to step in again, while sellers will want to see the price drop to increase bearish bets to new lows.
NZDUSD Technical Analysis – 4-hour timeframe
NZDUSD 4 hours
On the 4-hour chart, we can see that we now have a range between the 0.6150 resistance level and the 0.6050 support level. There is not much to do here and market participants are likely to continue to “play the range” until we get a breakout on either side.
NZDUSD Technical Analysis – 1-Hour Timeframe
NZDUSD 1 hour
On the 1-hour chart, we can see the recent catalysts that have ultimately led to the price moving in a limited range. We don’t have much on the calendar this week but the New Zealand Q2 CPI report on Wednesday will be something to watch as the weak report could increase the chances of an interest rate cut in August. The red lines mark the average daily range for the day.
Upcoming incentives
Today, we’ll hear Fed Chairman Powell speak at the Economic Club of Washington, D.C. Tomorrow, we’ll hear the U.S. retail sales report. On Wednesday, we’ll hear New Zealand’s second-quarter CPI and a speech from Fed Chairman Wall Street. And on Thursday, we’ll wrap up with the latest U.S. jobless claims numbers.
