USD:
The
US dollar strengthened across the board on Friday after Fed Chair Warsh
delivered a hawkish speech at the Jackson Hole Symposium.
The key passage was him
saying “I would be hard pressed to describe broad financial conditions as
restrictive”. The market interpreted that as him leaning against the
recent easing in financial conditions and, therefore, retightened them.
This process has,
of course, extended the corrections in the “debasement” trades, with
the US dollar returning to pre-US Treasury announcement levels. The rate hike
probabilities for the September meeting have also increased, with the market
now seeing a 60% chance of a hike.
Warsh has also reiterated that the Fed is focused solely on inflation now
and mentioned that the progress has been slow. For this reason, I think only a
soft US CPI report could bring the probabilities below 50% and deter the Fed
from hiking at the upcoming meeting.
If the
probabilities stay at or above 50%, the Fed might be forced to hike regardless
because failure to do so would send a dovish message.
NZD:
On the NZD side, the RBNZ
is widely expected to raise the OCR by 25 bps, bringing it to 2.75%. In its
latest projections, the central bank signalled that the OCR could be increased
to 3.00% by year-end and then remain there for the rest of 2027. The market pricing
is in line with the RBNZ projections for 2026, but not for 2027 where it sees two
more rate hikes to come.
For this reason, there’s a
downside risk for the kiwi in case the RBNZ fails to match or outhawk the
market. The focus will be on the updated macroeconomic projections and signals
about the future policy path.
NZDUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that the NZDUSD pair has been in a textbook uptrend with clean swing highs
and swing lows. The price pulled back from a key resistance zone around the
0.5990 level and it’s now near the major upward trendline. The buyers will
likely lean on the trendline with a defined risk below it to keep pushing into
new highs. The sellers, on the other hand, will look for a break to pile in for
a drop into the 0.55 handle next.
NZDUSD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have
a minor downward trendline defining the recent pullback into the major
trendline. If the price comes back into the downward trendline, we can expect
the sellers to lean on it with a defined risk above it to keep pushing into new
lows. The buyers, on the other hand, will look for a break to extend the rally
into the key resistance zone around the 0.5990 level next.
NZDUSD TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as from a risk management perspective, the buyers will
have a better risk to reward setup around the major upward trendline, while the
sellers will want to wait either for a pullback into the minor downward trendline
or a break below the major upward one. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow, we have the
US ISM Manufacturing PMI and the US Job Openings data. On Wednesday, we have
the RBNZ rate decision and US ADP report. On Thursday, we have Fed’s Waller,
the US Jobless Claims and the US ISM Services PMI. On Friday, we conclude the
week with the US NFP report.
This article was written by Giuseppe Dellamotta at investinglive.com.