Fundamental
Overview
The main culprit for the US
Dollar strength lately has been the rally in long term Treasury yields. The
yield curve has been bear-flattening which is what you would expect with higher
growth and potentially higher inflation expectations.
There’s a good argument
that the markets have been already positioning for a Trump’s victory which is
expected to strengthen the higher growth and less rate cuts expectations.
As previously mentioned,
this is the trend for now and it’s generally a bad idea to fight such trends
without a strong catalyst. The US Dollar will likely remain supported unless
Harris wins the US elections and we get a correction in Treasury yields.
On the NZD side, the latest
New Zealand Q3 CPI missed expectations solidifying the
market’s view for another 50 bps cut at the upcoming meeting and even pricing 22%
chance of a 75 bps move. In 2025, the market expects four more 25 bps cuts.
NZDUSD
Technical Analysis – Daily Timeframe
NZDUSD Daily
On the daily chart, we can
see that NZDUSD broke below the key 0.6050 support zone and extended the drop into new lows. From
a risk management perspective, the sellers will have a better risk to reward
setup around the support
turned resistance, while the buyers will want to see the price breaking
higher to start targeting the 0.6217 resistance next.
NZDUSD Technical
Analysis – 4 hour Timeframe
NZDUSD 4 hour
On the 4 hour chart, we can
see that we have a downward trendline defining the current bearish
momentum. The sellers will likely lean on it to position for new lows, while
the buyers will look for a break higher to increase the bullish bets into new
highs.
NZDUSD Technical
Analysis – 1 hour Timeframe
NZDUSD 1 hour
On the 1 hour chart, we can
see that the price broke above another minor trendline that was defining the
bearish momentum on this timeframe. The rally stalled at the most recent swing high
around the 0.60 handle.
The buyers will want to see
the price breaking above this level to increase the bullish bets into the major
trendline, while the sellers will likely step in around this level to position
for new lows. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we get the US ADP and the US GDP. Tomorrow, we have the US PCE, the US
Jobless Claims and the US Employment Cost Index. Finally, on Friday, we
conclude the week with the US NFP and the US ISM Manufacturing PMI.