Last
week, the NFP missed
expectations for a second time in a row and the previous numbers were all
revised lower. This was seen as a disappointment as the labour market seems to
be a touch weaker than previously expected. Nevertheless, the unemployment rate
fell once again and lessened the disappointment from the miss in the payrolls
number. The worse part for the Fed is that the average hourly earnings beat
expectations, and such high wage growth is not consistent with a sustainable
return to the 2% target. It’s worth reminding though, that the Fed will see
another NFP report before the September meeting, so this NFP doesn’t change much,
but the data leading into the meeting can still weigh on sentiment.
The RBNZ, on the other hand, kept its official cash
rate unchanged while stating that it will remain at the restrictive level for
the foreseeable future to ensure that inflation comes down back to target. The
recent New Zealand inflation and employment data though surprised to the upside
which might put some pressure on the central bank at the next rate decision,
although they are more likely to keep rates steady.
NZDUSD Technical Analysis –
Daily Timeframe
NZDUSD Daily
On the daily chart, we can see that the NZDUSD
selloff from the 0.6389 resistance seems to
be unstoppable as the US data remains quite strong. The sellers will have to
break the 0.6050 support to target the break of the 0.5987 level next. The
buyers, on the other hand, will need the price to break above the trendline to
switch the bias from bearish to bullish and start targeting a rally towards the
0.6389 resistance.
NZDUSD Technical Analysis –
4 hour Timeframe
NZDUSD 4 hour
On the 4 hour chart, we can see that the price is diverging with the
MACD right
when it’s approaching the 0.6050 support. This is generally a sign of weakening
momentum often followed by pullbacks or reversals. In this case, we may see a
pullback all the way back to the downward trendline where the sellers will have
an even better risk to reward setup to target the lows.
NZDUSD Technical Analysis –
1 hour Timeframe
NZDUSD 1 hour
On the 1 hour chart, we can see more
closely the support level and the divergence with the MACD. Aggressive buyers
may start to pile in here with a defined risk below the level and target the
trendline. The sellers, on the other hand, will want to see the price breaking
lower to pile in even more aggressively and extend the selloff into the 0.5987
low.
Upcoming Events
This week the
main event will be the US CPI report on Thursday. The market is likely to focus
more on the Core readings as this is what the Fed is more interested in. Higher
than expected data should give the US Dollar a boost as the market’s
expectations will be skewed more on the hawkish side. On the other hand, lower
than expected readings should weigh on the USD as it would support the
soft-landing narrative in the short-term. At the same time of the US CPI data,
we will also see the latest US Jobless Claims report, which is less likely to
move the market since it’s released at the same time of the CPI, but big
surprises should have an effect, nonetheless. Finally, we conclude the week
with the University of Michigan Consumer Sentiment report on Friday where the
market is likely to focus more on the inflation expectations figures.