The USD got a boost
yesterday from the strong US
PMIs which lifted Treasury yields and put in question the rate cut in
September with the probability falling to roughly 60%. I would argue
that the details weren’t that bad on the inflation front but overall good for
the growth side. If the market digest it as good news today, we should see the
risk-on sentiment returning which is generally negative for the greenback.

The NZD,
on the other hand, remains supported from the hawkish RBNZ decision
where the central bank pushed further out the timing for a rate cut and even
added that they considered a rate hike. If the risk-on sentiment returns, the Kiwi
will likely rise to new highs.

NZDUSD Technical
Analysis – Daily Timeframe

On the daily chart, On the
daily chart, we can see that NZDUSD broke above the trendline
recently following the US CPI report and consolidated around the highs. This breakout
opened the door for a rally into the 0.6217 swing level.

NZDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the buyers continue to step in around the upward trendline where they
will also have the 50% Fibonacci retracement level for confluence.
The sellers, on the other hand, will need to see the price breaking below the
trendline to invalidate the bullish setup and position for a drop into the 0.60
handle.

NZDUSD Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can
see that we’ve been stuck in a range between the 0.6095 support and
0.6140 resistance. A breakout on either side should trigger a bigger move as
the momentum will likely pick up.

It’s unlikely that we will
see it to the upside today though given that the upper limit of the average daily range stands right at the resistance and we don’t have any catalyst that
could lead to a bigger move. Therefore, the risk for the buyers is a breakout
to the downside which could happen if the market interprets yesterday’s data
as bad news for inflation.

Upcoming
Catalysts

There are no
catalysts today so the market should trade based on the yesterday’s US PMI by
either fading the moves or print new lows.

This article was written by Giuseppe Dellamotta at www.forexlive.com.