NZDUSD Technical Analysis – RBNZ and Fed Chair Powell on the agenda

Fundamental
Overview

The USD came under some
pressure at the start of last week following the US CPI report as the data came
mostly in line with expectations. In the following days though, we got some
hottish data with the US PPI beating expectations by a big margin, the US
Jobless Claims improving further and the inflation expectations in the UMich
survey surprising to the upside.

Overall, we ended the week
basically flat on the US dollar as the aggressive dovish expectations on the
Fed got trimmed a bit. Nevertheless, given the overreaction from the Fed
members to the last soft NFP, a September cut looks unavoidable now and only a
hot NFP report in September might get us to a 50% probability (although it
would certainly diminish expectations for rate cuts after the September one).

The focus has now switched
to Fed Chair Powell’s speech at the Jackson Hole Symposium on Friday. Traders
will be eager to see if he changes his stance as well. Most likely though, he
won’t pre-commit to anything and just reiterate that they will decide based on
the totality of the data.

On the NZD side, nothing
has changed fundamentally, and we haven’t got any notable data other than the labour
market report which came mostly in line with expectations and didn’t change
much for the RBNZ pricing. The market still expects around 41 bps of easing by
year-end with 94% probability of a cut tomorrow. Tomorrow’s cut would bring
interest rates to the central bank’s estimated 3% neutral rate.

NZDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the NZDUSD pair pulled back just before hitting the major trendline around the 0.60 handle. If we get
another rally, we can expect the sellers to step in around the trendline with a
defined risk above it to position for a drop into the key 0.5850 support zone. The buyers, on the other hand, will look
for a break above the trendline to increase the bullish bets into the 0.6050
resistance next.

NZDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price recently broke below the upward trendline that was defining
the bullish momentum. This might be a signal for a deeper pullback into the
0.5850 support zone. If the price break below the recent low at 0.5906, we can
expect the sellers to pile in to extend the drop into the support zone. The
buyers, on the other hand, will have a much better risk to reward setup around
the support zone to position for a rally into the 0.6050 resistance.

NZDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we could be forming a tight range between the 0.5944 and the 0.5906
level. Given that we have the RBNZ tomorrow, these levels might not mean much.
If we get a hawkish decision, we can expect the buyers to pile in on a break
above the 0.5944 level to target the major trendline. Conversely, a dovish
decision should trigger a downside breakout and a move into the 0.5850 support.
The red line define the average daily range for today.

Upcoming Catalysts

Tomorrowwe
have the RBNZ rate decision, Fed’s Waller speaking and the FOMC meeting
minutes. On Thursday, we get the US Flash PMIs as well as the US Jobless Claims
figures. Finally, on Friday, we conclude the week with Fed Chair Powell speech
at the Jackson Hole Symposium.