NZDUSD stalls at a major trendline as focus turns to US inflation data

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.