Fundamental
Overview
The USD weakened across the
board on the Fed’s decision but eventually erased all the losses and increased
the gains as traders digested all the information and realised the projected
rate path was more hawkish than market’s pricing.
In fact, the dot plot
showed that the FOMC projected two more rate cuts for 2025 by a narrow
majority, with the rest of officials expecting just one more or even none.
Moreover, the Fed projected just one cut in 2026 compared to three that the
market was pricing before the decision.
Fed Chair Powell then
labelled the rate cut as a “risk management” action given the weakening in the
labour market data. But overall, he sounded pretty neutral even though he
understandably placed more emphasis on the labour market given the two consecutive
soft NFP reports.
The day after the FOMC
decision, we got solid US jobless claims report, and the greenback increased
the gains further. Looking forward, it’s going to be all about the data. Strong
data will likely trigger a hawkish repricing in interest rates expectations and
support the greenback. On the other hand, weak data will likely continue to
weigh on it.
On the NZD side, the RBNZ
delivered a more dovish than expected cut at the last meeting as it projected
two more rate cuts and the minutes showed that not only a 50 bps cut was
actively discussed but two members did vote for it. Last week, we got a big downside
surprise in the New Zealand GDP data and the NZD sold off as the market started
to price in higher chances of a 50 bps cut at the upcoming meeting.
NZDUSD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that the NZDUSD dropped all the way back to the key 0.5850 support zone. This is where the buyers are now stepping
in with a defined risk below the support to position for a rally into the
0.6050 resistance. The sellers will want to see the price breaking lower to
increase the bearish bets into the 0.57 handle next.
NZDUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see more clearly the recent selloff that began with the FOMC decision and
eventually increased the momentum following the weak New Zealand GDP data.
There’s not much we can glean from this timeframe, so we need to zoom in to see
some more details.
NZDUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that the bearish momentum has been waning as the price approached the key
support zone. We now have a very tight range between the 0.5863 resistance and
the 0.5843 support. The buyers will look for an upside breakout to target a pullback into the 0.59 handle, while the sellers will want to see the price breaking lower to extend the selloff into the 0.57 handle next. The red line define the average daily range for today.
Upcoming Catalysts
Tomorrow we have the US Flash PMIs, as well
as Fed Chair Powell speaking. On Thursday, we get the latest US Jobless Claims
figures. On Friday, we conclude the week with the US PCE report. Keep also an
eye on Fed speakers this week.
This article was written by Giuseppe Dellamotta at investinglive.com.