Basic overview
The USD continues to consolidate around the high levels except against commodity currencies where it extended to new highs. Last week's US inflation data was again disappointing although the data that feeds into the Core PCE overall was mixed as forecasters of the expected to increase 0.13% M / M.
Despite this, Treasury yields have continued to rise and are now back around their post-US election highs. There is some understandable uneasiness in the bond market with the hot US data and the Fed continuing to cut into an accelerating economy.
The Fed is expected to cut today by 25 bps bringing the FFR to 4.25-4.50%. We also get an updated Summary of Economic Projections (SEP) where growth and inflation should be revised upwards, and the Dot Plot is likely to show two rate cuts in 2025. Fed Chairman Powell acknowledged the strength of US data and announced a slowdown in the pace of easing.
This is already priced in as the market expects just two rate cuts in 2025, with the first coming in March at the earliest. Therefore, the market reaction will be driven by deviations from expectations.
On the NZD side, the RBNZ cut interest rates by 50 bps as expected recently. We don't have new New Zealand data in the meantime, but the market increased the odds of a 50 bps cut in February to 87% with a total discount of 108 bps by the end of next year.
NZDUSD Technical Analysis – Daily Time Chart
NZDUSD per day
On the daily chart, we can see that NZDUSD broke through the 2023 low around the 0.5773 level. There is nothing special support
now to the 2022 low around the 0.55 handle. From a risk management perspective, sellers will have a better risk to reward position around the line of motion
to position for lows, while the buyers will look for a break higher to start targeting the 0.6050 resistance next.
NZDUSD Technical Analysis – 4 hour timeframe
NZDUSD 4 hours
On the 4 hour chart, we can see that we have another small downward trend defining the current bearish trend. The sellers are likely to continue the trend to continue entering new levels, while the buyers will look for a break higher to target a larger pullback into the main transfer line.
NZDUSD Technical Analysis – 1 Hour Timeframe
NZDUSD 1 hour
On the 1 hour chart, there is not much else we can add here because the sellers will be looking for a rejection from the trend line, while the buyers will be looking for a break to the upside. The red lines define the average daily range for today.
Catalysts to come
Todaywe have the FOMC Policy Decision. Tomorrow, we will get the latest US jobless claims numbers. On Friday, we finish the week with US PCE data.
