The recent beat in the non-farm payrolls (NFP) data, followed by concerning
factors like a higher unemployment rate and fewer average weekly hours, has
resulted in a weakening of the USD. The market has adjusted its hawkish
expectations to less hawkish ones because a looser job market can help reduce
inflation. Additionally, the disappointment in the ISM Services Purchasing Managers’
Index (PMI),
particularly in the lower prices paid sub-index, has further contributed to the
expectations that core inflation may soon start to normalise.
The significant miss in US jobless claims was taken with a grain of salt due
to seasonal adjustments. Continuing claims have shown even greater improvement,
indicating that people are finding jobs relatively quickly after being
unemployed. Overall, the strong hawkish sentiment observed in May due to
positive economic data has recently started to reverse. This change in
sentiment occurred as Federal Reserve members expressed a preference to hold
off on major actions during the upcoming Federal Open Market Committee (FOMC)
meeting and the misses in the data.
NZDUSD Technical Analysis –
Daily Timeframe
On the daily chart, we can see that the big
reversal in hawkish expectations for the June FOMC meeting led the NZDUSD to
pullback into the downward trendline where we
can also find the red 21 moving average. This is
a key resistance level
and we will likely see the sellers leaning on this trendline to position for a
selloff towards the previous low at 0.6000. The buyers will need to break above
the trendline to extend the rally to new highs.
NZDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we also have
some confluence from the
50% Fibonacci retracement level
and the psychological 0.6150
level. This is a good spot for the sellers to position for more downside from
here. The buyers will need to break above the trendline to get the conviction
to target new highs.
NZDUSD Technical Analysis –
1 hour Timeframe
On the 1 hour chart, we can see that the
price is diverging with
the MACD
trading into the trendline. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. In this case, a divergence here may
be significant and increases the odds of the bearish setup. Anyway, today’s
data will decide where the NZDUSD will go next.
This week is packed with many significant events,
starting with the release of the US Consumer Price Index (CPI) report today.
This report is expected to strongly influence expectations for tomorrow’s
Federal Open Market Committee (FOMC) rate decision and the next meetings. The most
straightforward scenarios are likely to be a rally in the NZDUSD pair if the
CPI data misses across the board and a selloff in case the data beats on all
fronts. The market is likely to pay more attention to the Core CPI, making it
the most critical measure to monitor.
Moving on to later in the
week, we have the release of the Jobless Claims report and the University of
Michigan consumer sentiment survey. During the previous release of the consumer
sentiment survey, there was a substantial rise in long-term inflation
expectations, which significantly impacted the market. Consequently, if this
survey fails to meet expectations, it would be viewed as positive news for NZDUSD.