NZDUSD Technical Analysis – The risk-off sentiment weighs on the Kiwi

Fundamental Overview

The USD has been relatively stronger against most major currencies since Friday as the markets went into risk-off following some bad US data release. In fact, we got a weak US Flash Services PMI and soon after the long-term inflation expectations in the Final UMich Consumer Sentiment survey jumped to a new 30-year high.

The risk-off sentiment picked up after the jump in the long-term inflation expectations. The market might be fearing that in case we get a slowdown, the Fed might not be fast enough in cutting rates amid inflation remaining above target and uncomfortably high long-term inflation expectations.

This is something to keep in mind in light of the next NFP and CPI reports coming out before the March FOMC decision where we will also get the updated SEP and Dot Plot.

On the NZD side, the RBNZ cut interest rates by 50 bps as expected last week but Governor Orr sounded less dovish than expected as the central bank will now slow down the pace of easing as they approach their estimated neutral rate.

NZDUSD Technical Analysis – Daily Timeframe

On the daily chart, we can see that NZDUSD is pulling back again towards the key 0.57 support. That’s where we can expect the buyers to step in with a defined risk below the support to position for a rally into the 0.5850 level next. The sellers, on the other hand, will want to see the price breaking lower to start targeting the 0.55 handle.

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 we get a pullback into it, we can expect the buyers to lean on the trendline with a defined risk below it to position for the rally into the 0.5850 level next. The sellers, on the other hand, will look for a break below the trendline to increase the bearish bets into the 0.55 handle.

NZDUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we have a minor resistance zone around the 0.5735 level. If we get a pullback into the resistance, we can expect the sellers to step in with a defined risk above the resistance to target a break below the major trendline and the support zone. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new highs. The red lines define the average daily range for today.

Upcoming Catalysts

Today we have the US Consumer Confidence report. On Thursday, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the US PCE data.