It is much easier to take a straight comparison on how the odds have changed. Here’s a look at things back at the end of December i.e. just two weeks ago:

• Federal Reserve: -156 bps (first -25 bps in March)
• European Central Bank: -161 bps (first -25 bps in April)
• Bank of England: -141 bps (first -25 bps in May)
• Swiss National Bank: -66 bps (first -25 bps in June)
• Bank of Canada: -120 bps (first -25 bps in April)
• Reserve Bank of Australia: -53 bps (first -25 bps in June)
• Reserve Bank of New Zealand: -93 bps (first -25 bps in May)

And here is how that has changed as of now:

• Federal Reserve: -140 bps (first -25 bps in May)
• European Central Bank: -138 bps (first -25 bps in April)
• Bank of England: -116 bps (first -25 bps in June)
• Swiss National Bank: -54 bps (first -25 bps in June)
• Bank of Canada: -122 bps (first -25 bps in April)
• Reserve Bank of Australia: -46 bps (first -25 bps in September)
• Reserve Bank of New Zealand: -85 bps (first -25 bps in July)

Besides the Bank of Canada, every other central bank have seen rate cut odds slashed with most also seeing the timing of the first rate cut shift. That speaks to the consideration put into the market moves last week and it is now down to the US CPI data tomorrow to bring all of that together.

Will we get more of a pushback on the aggressive rate cut pricing similar to the week before? Or are we going to revert back to the euphoric run in markets in November and December?

This article was written by Justin Low at www.forexlive.com.

• The Fed left interest rates unchanged as
  expected at the last meeting with a shift in the statement that indicated the
  end of the tightening cycle.
• The Summary of Economic Projections showed a
  downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
  was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
  in 2024 compared to just two in the last projection.
• Fed Chair Powell didn’t
  push back against the strong dovish pricing and even said that they are focused
  on not making the mistake of holding rates high for too long.
• The latest US PCE missed
  expectations across the board with the Core 6-month annualised rate falling
  below the Fed’s target at 1.9%.
• The NFP report beat
  expectations although there was more weakness under the hood.
• The latest ISM Manufacturing
  PMI
  beat expectations, while the ISM Services PMI missed
  by a big margin.
• The hawkish Fed members have been leaning
  on a more neutral side lately.
• The market expects the Fed to start cutting rates
  in Q1 2024.

NZD

• The RBNZ kept its official cash rate
  unchanged at the
  last meeting stating that demand growth continues to ease and it’s expected to
  decline further with monetary conditions remaining restrictive.
• The New Zealand inflation data missed expectations supporting the
  RBNZ’s stance.
• The latest labour market report showed a notable increase in
  the unemployment rate and a slowdown in wage growth which is something that will
  keep the RBNZ on the sidelines.
• The Manufacturing PMI improved although it remains in
  contractionary territory. The Services PMI, on the other hand, jumped back
  into expansion.
• The market expects the RBNZ to start
  cutting rates in Q2 2024.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that NZDUSD is now
trading at a key support zone
around the 0.6215 level where we can also find the 50% Fibonacci retracement level
for confluence. This is
where the buyers are stepping in to target a rally into the 0.64 resistance.
The recent break below the trendline might be a bad omen for the buyers though.
In fact, if the price breaks below the support, we can expect the sellers to
pile in more aggressively and extend the drop into the 0.61 level next.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more clearly the recent
price action. We can notice that the latest leg lower diverged with the
MACD, which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, the buyers piled in to defend the support zone and
position for the rally into the 0.64 resistance, but the pair got stuck in a
consolidation.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the price action between the 0.6215 support and the 0.6280 resistance.
This rangebound market gives us a clear setup:

• A break to the upside is likely to lead to
  a rally into the 0.64 resistance.
• A break to the downside should trigger a
  selloff into the 0.61 support.

Upcoming Events

Tomorrow we will get the latest US CPI report and the
US Jobless Claims figures, while on Friday we conclude the week with the US PPI
data.

This article was written by FL Contributors at www.forexlive.com.