NZDUSD Technical Analysis – Watch this key level

US:

• The Fed hiked by 25 bps as
  expected and kept everything unchanged.
• Fed Chair Powell reaffirmed their data dependency
  and kept all the options on the table.
• The US economic data keeps on surprising to the
  upside, but inflation expectations and CPI readings continue to show
  disinflation with the last two Core CPI M/M figures
  coming in at 0.16%.
• At the moment, the market doesn’t expect another
  hike from the Fed, but the next NFP and CPI data will be crucial to confirm or
  change this view.

New Zealand:

• The RBNZ 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 surprised to the upside but
  the PMIs are in contraction with the Services PMI last week plunging into
  contraction.
• The wage growth has also missed
  expectations and it’s something that the central banks are watching closely for
  second round effects.
• The RBNZ is expected to keep the
  cash rate steady at the next meeting.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that after breaking
below the May low and extending to the downside some more, the NZDUSD started
to pull back into the broken level in what could end up being a classic “break
and retest” pattern. In fact, we can expect the sellers to pile in around the
0.5987 level with a defined risk above the level to target new lows with the
ultimate target standing at 0.5514.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price has
been diverging with the
MACD for a
while and this is generally a sign of weakening momentum often followed by
pullbacks or reversals. In this case, we are in fact seeing a pullback into the
resistance where we
can find the confluence with the
downward trendline and the
38.2% Fibonacci retracement level.

NZDUSD Technical Analysis –
1 hour Timeframe

On the
1 hour chart, we can see that the price is indeed rallying towards the 0.5987
resistance area where we are expecting the sellers to pile in strongly and
restart the downtrend. The buyers, on the other hand, will want to see the
price breaking above the resistance to have more conviction on the upside and
start targeting new highs with the 0.61 handle as the first target. More
conservative sellers may want to wait for the price to break below the
counter-trendline before joining the downtrend.

Upcoming Events

This week is
pretty empty on the economic data side as we will only have the PMIs tomorrow
and the US Jobless Claims on Thursday. Given the strong appreciation in the US
Dollar seen in the past weeks, we can expect some USD weakness if the data
misses expectations, and we will likely need much stronger than expected
readings to see another sustained rally in the greenback. Remember also that
this is the Jackson Hole Symposium week, so we will hear from many central
bankers including Fed Chair Powell, who is set to speak on Friday.