NZDUSD Technical Analysis – We are testing a key trendline

Basic Overview

Yesterday, we got the US ISM Manufacturing PMI, and although the headline number came in below expectations, the report was better than the previous month.

The bad news was that new orders continued to fall to a contractionary level, which is an indicator of demand and is generally considered a leading indicator.

Tight monetary policy has certainly weighed on the manufacturing sector, and if the Fed can avoid a hard landing by cutting interest rates in the coming months, we could see a rebound in the fourth quarter.

From a monetary policy perspective, the data did not change much for the Fed’s outlook, although the odds of a 50bp rate cut have risen slightly. For the Reserve Bank of New Zealand, the market sees a 40% chance of a 50bp rate cut in October and a total of 75bp of easing by the end of the year.

NZDUSD Technical Analysis – Daily Time Frame

On the daily chart, we can see that the NZD/USD pair is testing a key support area around the 0.6175 level where we can find the confluence of the trend line and the 38.2% Fibonacci retracement level. We can expect buyers to step in with a defined risk below the trend line to position themselves for a fresh high. On the other hand, sellers will want to see the price drop lower to increase their bearish bets towards the 0.6050 support level.

NZDUSD Technical Analysis – 4-hour timeframe

On the 4-hour chart, we can more clearly see the setup around the 0.6175 level. There is also an opposing trend line that defines the bearish momentum for the pullback. Buyers will want to see the price rise to increase bullish bets to new highs, while sellers are likely to count on it to place a position for a break below the major uptrend line.

NZDUSD Technical Analysis – 1-Hour Timeframe

On the 1-hour chart, we can see that the price has settled near the trend line without any major reaction from the ISM Manufacturing PMI. There is not much we can conclude from this time frame as buyers will only be looking for a rebound, while sellers will be looking for a breakout. The red lines mark the average daily range for the day.

Upcoming incentives

Today we have the US job openings. Tomorrow we get the US jobless claims numbers and the ISM services PMI. And finally, on Friday we wrap up the week with the US nonfarm payrolls report.