Fundamental
Overview
The USD rallied across the
board last week after a slate of strong US data. The focus was mainly on Jobless Claims which beat expectations by a big
margin with Initial Claims falling to the lowest level since July and
Continuing Claims improving further. This triggered a hawkish repricing in
interest rates expectations since the Fed started cutting rates solely due to
weaker labour market data.
This means that if we
continue to get stronger labour market data, the Fed could start turning more
hawkish again and we might not get another cut in October, or more probably in
December. Therefore, there’s still plenty of room for the US dollar to appreciate
in case of strong data as the market’s pricing remains too dovish. The Fed
projected 75 bps of easing by the end of 2026, while the market is still
pricing 105 bps.
The greenback erased all
the gains triggered by last week’s data in the meantime as we are likely
experiencing a pullback after a very strong rally. Other possible reasons
include the government shutdown fears and quarter-end flows.
On the NZD side, the RBNZ
delivered a more dovish than expected cut at the last meeting as it projected
two more rate cuts and the minutes showed that not only a 50 bps cut was
actively discussed but two members did vote for it. Recently, we got a big
downside surprise in the New Zealand GDP data and the NZD sold off aggressively
as the market started to price in higher chances of a 50 bps cut at the
upcoming meeting. Right now, there’s a 35% probability of a 50 bps cut.
NZDUSD
Technical Analysis – Daily Timeframe
NZDUSD daily
On the daily chart, we can
see that the NZDUSD broke below the key 0.5850 support zone and extended the drop into the 0.5750
level. The market is pulling back at the moment after the strong selloff and in
case we get into the 0.5850 zone, we can expect the sellers to step in there
with a defined risk above the zone to position for a drop into new lows. The
buyers, on the other hand, will look for a break higher to extend the pullback
into the trendline around the 0.5950 level.
NZDUSD Technical
Analysis – 4 hour Timeframe
NZDUSD 4 hour
On the 4 hour chart, we can
see that we have a minor upward trendline defining the current pullback. We can
expect the buyers to lean on the trendline with a defined risk below it to keep
pushing into the 0.5850 zone, while the sellers will look for a break lower to
increase the bearish bets into new lows.
NZDUSD Technical
Analysis – 1 hour Timeframe
NZDUSD 1 hour
On the 1 hour chart, we can
see that we are pulling back after hitting the most recent swing low around the
0.5808 level. The buyers will want to see the price breaking higher to keep
pushing into new highs, while the sellers will likely continue to step in
around that level with a defined risk above it to keep targeting a break below
the upward trendline. The red line define the average daily range for today.
Upcoming Catalysts
Today we get the US Job Openings data and the US Consumer
Confidence report. Tomorrow, we have the US ADP and the US ISM Manufacturing
PMI. On Thursday, we get the latest US Jobless Claims figures. On Friday, we
conclude the week with the US NFP report and the US ISM Services PMI. Keep also
an eye on Fed speakers.
