The US Dollar continues to
consolidate around the highs although it’s stronger against the commodity
currencies. In the bigger picture, the market reached the peak in the repricing
of interest rates expectations, and it will need stronger reasons to price out
the remaining rate cuts for 2025.

In fact, despite lots of
strong US data, the market’s pricing remaining largely unchanged around three
rate cuts by the end of 2025. The focus is now on the US CPI report. It looks
like the Fed really wants to cut next week before pausing for some months. So,
we might need an upside surprise in the core inflation numbers to force them to
change plans.

Even if the Fed decides to
cut next week despite a hot CPI, the market will likely scale back further the
rate cuts expectations for 2025 and that could trigger some risk aversion with
the US Dollar rallying across the board. The best scenario would be a soft
report given the overstretched long positions in the greenback. In such a case,
we can expect the US Dollar to selloff across the board.

On the NZD side, the RBNZ cut interest rates by 50 bps as expected
recently. We haven’t got any fresh New Zealand data in the meantime, but the
market increased the chances for a 50 bps cut in February to 57% with a total
of 104 bps of easing by the end of next year.

NZDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that NZDUSD sold off all the way to the 2023 low around the 0.5773 level.
This is where we can expect the buyers to step in with a defined risk below the
level to position for a rally back into the 0.6050 level. The sellers, on the
other hand, will want to see the price breaking lower to increase the bearish
bets into new lows.

NZDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, there’s
not much we can add here as the buyers will look for a rally from this level
and the sellers will look for a break. From a risk management perspective, the
sellers will have a better risk to reward setup around the trendline although we will likely need a soft
US CPI report today to trigger a rally into the trendline.

NZDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor downward trendline defining the current bearish
momentum on this timeframe. The sellers will likely continue to lean on it to
position for new lows, while the buyers will look for a break higher to
increase the bullish bets into the major trendline. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we get the US CPI report. Tomorrow, we have the US Jobless Claims and
the US PPI.

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