Basic overview
The US Dollar is still consolidating around the highs although it is stronger against commodity currencies. In the bigger picture, the market reached a peak in interest rate repricing, and stronger reasons will be needed to price the remaining rate cuts for 2025.
In fact, despite a lot of strong data from the US, the market prices remain unchanged around three rate cuts by the end of 2025. The focus is now on the US CPI report. It seems the Fed really wants to cut next week before pausing for several months. Therefore, we may need an upside surprise in the headline inflation numbers to make them change plans.
Even if the Fed decides to cut next week despite a hot CPI, the market is likely to ease further with the rate cut expectations for 2025 and that could slightly risk disruption caused by the general accumulation of the US Dollar. The best conditions would be a soft report with the conditions far too far behind the green. In such a case, we can expect the US Dollar to sell across the board.
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 57% with a total discount of 104 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 sold all the way to the 2023 low around the 0.5773 level. This is where we can expect buyers to step in with marked risk below the level to set up for a rally back to the 0.6050 level. On the other hand, the sellers want to see the price break lower to increase the bearish bets to low levels.
NZDUSD Technical Analysis – 4 hour timeframe
NZDUSD 4 hours
On the 4 hour chart, we cannot add much here as the buyers will be looking for a rally from this level and the sellers will be looking for a break. From a risk management perspective, sellers will have a better risk to reward position around the line of motion although we will likely need a soft US CPI report today to trigger a rally into the trend line.
NZDUSD Technical Analysis – 1 Hour Timeframe
NZDUSD 1 hour
On the 1 hour chart, we can see that we have a small downtrend defining the current bearish trend on this time frame. It is likely that the sellers will continue to position for new levels, while the buyers will look for a higher break to increase the bullish bets into the main trend line. The red lines define the average daily range for today.
Catalysts to come
Today we get the US CPI report. Tomorrow, we have US Jobless Claims and US PPI.
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