NZDUSD Technical Analysis – Dovish Fed feedback weigh additional on the USD

Fundamental
Overview

The USD extended the losses
yesterday following dovish comments from Fed’s Kashkari as he basically got in
line with other members for a rate cut in September. This change of heart was
triggered by the softer than expected NFP report last Friday.

Overall, the data wasn’t as
bad as one might think by just looking at the reaction but given that we were
positioned for a strong report and the pricing got more hawkish after the Fed’s
decision, the weaker data was enough to trigger a quick repricing.

In fact, the market is now
pricing 60 bps of easing by year-end compared to just 35 bps before the NFP
release. It’s highly likely that more benign data will see Fed Chair Powell
opening the door for a cut in September at the Jackson Hole Symposium.

Nonetheless, the ISM Services PMI this week showed a new high
in the prices index and the US jobless claims today could trigger a rethink on
the actual softness of the labour market in case we get strong data. Of course,
weak figures will just solidify market’s expectations and weigh on the
greenback further.

On the NZD side, the labour market report came mostly in line with
expectations and didn’t change much for the RBNZ pricing. The market still
expects around 40 bps of easing by year-end with 87% probability of a cut at
the upcoming meeting.

NZDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that NZDUSD bounced from the key 0.5850 support zone following the soft NFP report. The target
for the buyers should be the downward trendline around the 0.6020 level. That’s
where we can expect the sellers to step in with a defined risk above the
trendline to position for a drop back into the key support.

NZDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have an upward trendline defining the bullish momentum. If the
price were to pull back into the trendline, we can expect the buyers to lean on
it to position for a rally into the major downward trendline. The sellers, on
the other hand, will look for a break lower to increase the bearish bets into
the key support zone.

NZDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have another minor trendline that could act as support for the
buyers. The sellers, on the other hand, will look for downside breakout to keep
targeting new lows. We can also see that the price is now trading near the
upper bound of the average daily range for today. We can generally see
pullbacks from such levels and in any case, the buyers would be better off
stepping in around the trendlines from a risk/reward perspective.

Upcoming Catalysts

Today we get the latest US Jobless Claims
figures.