This week, Fed took a slightly more hawkish approach than expected, keeping interest rates steady at 5.00-5.25, but raising the expected final rate in the Dot Plot by 50 basis points. The Fed decided to pause and gather more economic data before making a decision on a possible interest rate hike in July. This cautious approach may be justified by the weaker details found in the latest ones NFP message, ISM Services PMI message a CPI news, although baselines remain at elevated levels.
Fed Chairman Powell said a hike at the July meeting was an active consideration, but refrained from making any firm commitments. When the Dot Plot was released, the market quickly bid up the US dollar, but once Powell’s press conference began, the value returned to its original level. Overall, this suggests that the Federal Reserve is ready to take further measures to reduce inflation, but their decisions will depend on economic data. Yesterday count US Jobless Claims once again, they missed forecasts by a wide margin, which may indicate a weakening labor market.
NZDUSD Technical Analysis – Daily Time Frame
On the daily chart we can see that once the NZDUSD broke trend line, the pair strengthened strongly to a high of 0.6247. Sellers now have no strong resistance level to lean on, while buyers can start targeting the 0.6389 level. The moving averages they moved to a higher value, which should be a signal for more arrivals. The price has also stretched a bit, as we can see at a distance from the blue moving average of 8. In such cases, we can generally see some consolidation or a pullback to the moving average before the next move.
NZDUSD Technical Analysis – 4 Hour Time Frame
On the 4-hour chart, we can see that the red moving average of 21 is acting as a dynamic support for buyers and we can expect it to continue to do so even if there is a pullback. In fact, from a risk management perspective, buyers should wait for the price to pull back to the 0.6182 support where it will hit the 21 moving average as well as the 8 daily moving average for another run. Sellers, on the other hand, will want to see the price break below the support zone to rally and target the 0.6084 level.
NZDUSD Technical Analysis – 1 Hour Time Frame
On the 1 hour chart, we can see that the price is struggling a bit at the 0.6240 high as we head into the weekend. As mentioned earlier, buyers would be better off waiting for the price to pull back to the 0.6182 support, while sellers should wait for the price to break below the support zone before piling in for shorts. In the end, it will depend on the future data.
Today, the market will pay particular attention to the University of Michigan consumer sentiment report. Most recently, the market reacted strongly to this news as long-term inflation expectations showed a significant increase, from 3.0% to 3.2%. However, this figure was later adjusted to 3.1%. So, if we see a further rise in long-term inflation expectations, it is likely that the value of the dollar will go up. On the other hand, if the data does not meet the forecasts, we can expect the dollar to weaken.