Basic overview
The USD was largely down yesterday after a softer than expected level US headline CPI data as Treasury yields fell sharply in what could be the peak of inflationary hysteria and a rebound in expectations of rate cuts.
Surprisingly enough, the US Dollar pared all of its losses and ended the day largely flat across the board. This was a USD-only response as Treasury yields continue to trade around post-CPI levels while US funds extended gains.
There is no clear reason why the US Dollar reacted this way. Market prices are now showing 37 bps of discounting by the end of the year compared to 31 bps before the US CPI report.
On the NZD side, we don't have a major data release from New Zealand yet but as a reminder, the RBNZ cut interest rates by 50 bps as expected at the last meeting. The market continues to price in an 85% chance of a 50 bps cut in February but the total discount for this year has been reduced from 125 bps to 105 bps now.
NZDUSD Technical Analysis – Daily Time Chart
NZDUSD per day
On the daily chart, we can see that NZDUSD entered the main one line of motion yesterday but was rejected as the sellers stepped in with a marked risk above the trendline to position for a drop into the 2020 lows around the 0.55 handle. The buyers need to break the price above the trend line to regain control and start aiming for new highs.
NZDUSD Technical Analysis – 4 hour timeframe
NZDUSD 4 hours
On the 4 o'clock table, we see that a support zone around the 0.5585 level where the price has been rejected several times in the past weeks. This is where we can expect the buyers to step in with a marked risk below the support to position for a break above the trend line. The sellers, on the other hand, want to see the price break lower to increase the bearish bets into the 0.55 handle.
NZDUSD Technical Analysis – 1 Hour Timeframe
NZDUSD 1 hour
On the 1 hour chart, we can see that we have a small downward trend defining the current pullback into the support. It is likely that the sellers will continue to push into new levels, while the buyers will look for a higher break to increase the bullish bets to new highs. The red lines define the average daily range for today.
Catalysts to come
Todaywe get the latest US Jobless Claims numbers and US Retail Sales data.
