NZDUSD Technical Analysis – Eyes on the FOMC decision

Fundamental Overview

The USD continues to remain under pressure against most major currencies despite higher Core PCE estimates following the US CPI and PPI reports, and a better-than-expected Retail Sales data on Monday.

The market pricing for the Fed went from expecting more than 80 bps of easing by year-end at the peak of the risk-off sentiment to roughly 59 bps as of now. That didn’t provide a pullback in the US Dollar selloff though. The focus now switched to the FOMC decision due later today where the Fed is expected to keep rates steady.

On the NZD side, we haven’t got much in terms of new data. As a reminder, the RBNZ cut interest rates by 50 bps as expected at the last meeting but Governor Orr sounded less dovish than expected as the central bank wants to slow the pace of easing as they approach their estimated neutral rate. The market sees a total of 58 bps of easing by year-end with a 70% probability of a 25 bps cut at the upcoming meeting.

NZDUSD Technical Analysis – Daily Timeframe

On the daily chart, we can see that NZDUSD almost reached the key resistance zone around the 0.5850 level recently. That’s where we can expect the sellers to step in with a defined risk above the resistance to position for a drop back into the 0.55 handle. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 0.60 handle next.

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, then we can expect the buyers to lean on it to position for a rally above the resistance. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the 0.55 handle next.

NZDUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we have a counter-trendline defining the current pullback. The sellers will likely lean on it to keep targeting the major trendline, while the buyers will look for a break higher to pile back in for a rally into new highs. The red lines define the average daily range for today although they will likely be unreliable given the FOMC event later today.

Upcoming Catalysts

Today we have the FOMC Policy Decision. Tomorrow, we get the latest US Jobless Claims figures.