Fundamental Overview

The USD got a boost yesterday from the strong US PMIs which lifted Treasury yields and put in question the rate cut in September with the probability falling to roughly 60%. I would argue that the details weren’t that bad on the inflation front but overall good for the growth side. If the market digest it as good news today, we should see the risk-on sentiment returning which is generally negative for the greenback.

The NZD, on the other hand, remains supported from the hawkish RBNZ decision where the central bank pushed further out the timing for a rate cut and even added that they considered a rate hike. If the risk-on sentiment returns, the Kiwi will likely rise to new highs.

NZDUSD Technical Analysis – Daily Timeframe

NZDUSD Technical Analysis

On the daily chart, On the daily chart, we can see that NZDUSD broke above the trendline recently following the US CPI report and consolidated around the highs. This breakout opened the door for a rally into the 0.6217 swing level.

NZDUSD Technical Analysis – 4 hour Timeframe

NZDUSD Technical Analysis
NZDUSD 4 hour

On the 4 hour chart, we can see that the buyers continue to step in around the upward trendline where they will also have the 50% Fibonacci retracement level for confluence. The sellers, on the other hand, will need to see the price breaking below the trendline to invalidate the bullish setup and position for a drop into the 0.60 handle.

NZDUSD Technical Analysis – 1 hour Timeframe

NZDUSD Technical Analysis
NZDUSD 1 hour

On the 1 hour chart, we can see that we’ve been stuck in a range between the 0.6095 support and 0.6140 resistance. A breakout on either side should trigger a bigger move as the momentum will likely pick up.

It’s unlikely that we will see it to the upside today though given that the upper limit of the average daily range stands right at the resistance and we don’t have any catalyst that could lead to a bigger move. Therefore, the risk for the buyers is a breakout to the downside which could happen if the market interprets yesterday’s data as bad news for inflation.

Upcoming Catalysts

There are no catalysts today so the market should trade based on the yesterday’s US PMI by either fading the moves or print new lows.