The Fed hiked interest rates by 25 bps as expected and kept the policy
statement unchanged. The market was looking for clues and hints on the next
policy path, but it didn’t get anything. In fact, Fed Chair Powell just
reaffirmed their data dependency. Yesterday though, the US Jobless Claims beat expectations again by a big
margin sending the USD higher. As long as the US data remains this strong, the
USD should continue to appreciate.
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 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 NZDUSD sold off
strongly from the key 0.6389 resistance and it’s
now likely targeting the 0.5987 low. The moving averages have
crossed to the downside again as the bearish momentum prevails and the sellers
remain in control supported by stronger US data.
NZDUSD Technical Analysis –
4 hour Timeframe
NZDUSD 4 hour
On the 4 hour chart, we can see that we recently
got a fakeout around the 0.6230 resistance. In fact, the price continued to
rally past the resistance zone and the 38.2% Fibonacci retracement level
and then got smacked back down by the strong US Jobless Claims. The price has
broken below a counter-trendline, and the
moving averages crossed to the downside again. This is a bearish signal, and
the sellers should pile in aggressively in case the price pulls back.
NZDUSD Technical Analysis –
1 hour Timeframe
NZDUSD 1 hour
On the 1 hour chart, we can see that we
have a minor downward trendline where the sellers can lean onto to position for
another fall. From a risk management perspective, if the price pulls back to
the orange 38.2% Fibonacci retracement level, the sellers will have a better risk
to reward setup and have the red 21 moving average and the 0.62 handle for confluence. The
buyers, on the other hand, may start to pile in already in case the price
breaks above the minor trendline, but they will need the price to break above
the 0.6240 resistance zone to get back in control and target the highs.
Upcoming Events
Today the market will
be focused on the US PCE and ECI reports. The PCE is less likely to be market
moving given that is less timely than the CPI, so it will need a big surprise
to trigger a notable reaction. In fact, the Employment Cost Index (ECI) is
likely to be more important given the Fed’s focus on wage inflation and the
strength in the labour market. Higher than expected data should be bullish for
the USD, while lower than expected figure should be bearish in the short term.