Fundamental Overview
The USD sold off across the board on Friday following another soft NFP report. The dovish bets on the Fed increased as a result and the market is now expecting three rate cuts by year-end (70 bps). Moreover, we have also a 8% probability of a 50 bps cut in September but that will likely happen only if we get a soft CPI report tomorrow. In that case, the greenback will likely weaken further into the FOMC meeting.
Overall, if one zooms out, the US dollar continues to range although the dovish bets on the Fed keep weighing on the currency. Part of that could be the fact that the bearish positioning on the dollar could be overstretched and we might be at the peak of the dovish pricing.
In fact, if the rate cuts trigger stronger economic activity in the next months, the rate cuts in 2026 could be priced out and support the dollar. Nevertheless, the trend is still skewed to the downside, and we might need strong data to reverse it.
On the NZD side, the RBNZ delivered a more dovish than expected cut at the last meeting as it projected two more rate cuts and the minutes showed that not only a 50 bps cut was actively discussed but two members did vote for it. Since then, we haven’t got much in terms of economic data or macro developments and the pair rallied on the back of US dollar weakness.
NZDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the NZDUSD surged all the way to the major trendline where the rally stalled. The sellers will likely step in around these levels with a defined risk above the trendline to position for a drop back into the 0.5850 support zone. The buyers, on the other hand, will look for a break higher to increase the bullish bets into the 0.6050 resistance next.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor support zone around the 0.5920 level. If we get a pullback, we can expect the buyers to step in there with a defined risk below the support to position for a rally into new highs. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the 0.5850 support.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here but a break above the counter trendline around the 0.5950 level will likely see the buyers piling in for a rally into new highs. The red line define the average daily range for today.
Upcoming Catalysts
Today we get the US PPI report. Tomorrow, we get the US CPI report and the latest US Jobless Claims figures. On Friday, we conclude the week with the University of Michigan Consumer Sentiment report.
