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FUNDAMENTAL
OVERVIEWUSD:Last week, we got a hot US NFP report and slightly soft US CPI data. The market firmed up rate cut bets with
62 bps of easing seen by year-end. Overall, the data doesn’t really point in
that direction, but we will need to see more of it to confirm or deny the
market pricing. Given the negligible
changes to the big picture after all the data, the US dollar remained mostly
rangebound with mixed performance against the major currencies. The future
outlook will still be guided by the evolution of the data. This week, all the
important stuff will be released on Friday as we get the US Flash PMIs and the
Q4 GDP. We might also get the US Supreme Court decision on Trump’s tariffs.NZD:On the NZD side, the RBNZ is
widely expected to keep the OCR unchanged at 2.25% on Wednesday. At the last meeting, the
central bank’s projections implied a pause through 2026. The market disagrees
as it sees 37 bps of tightening by year-end. The data has been coming in better
and better, suggesting that the New Zealand economy turned a corner. Governor
Breman’s recent comments were neutral as she emphasised patience and full
optionality. The currency rallied so much mainly because of the US dollar weakness and the tight correlation with the Australian dollar.NZDUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAMEOn the daily chart, we can
see that the NZDUSD has been consolidating near the highs after the strong rally
at the end of January. There’s not much we can glean from this timeframe, so we
need to zoom in to see some more details.NZDUSD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAMEOn the 4 hour chart, we can
see that we have a key swing point around the 0.5995 level defining the bullish
momentum on this timeframe. From a risk management perspective, the buyers will
have a better risk to reward setup around the 0.5995 level to position for a
rally into new cycle highs. The sellers, on the other hand, will look for a
break lower to pile in for a drop into the 0.5928 level next.NZDUSD TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAMEOn the 1 hour chart, we can
see that we have a minor upward trendline defining the current consolidation.
The buyers will likely continue to lean on the trendline with a defined risk
below it to keep pushing into new highs, while the sellers will look for a
break lower to target the 0.5995 level. The red lines define the average daily range for today. UPCOMING CATALYSTSOn Wednesday we have the RBNZ policy decision and the FOMC meeting
minutes. On Thursday, we get the latest US Jobless Claims figures. On Friday,
we conclude the week with the US Q4 GDP, the US PCE price index for December,
the US Flash PMIs and a potential US Supreme Court decision on Trump’s tariffs.
This article was written by Giuseppe Dellamotta at investinglive.com.
💡 DMK Insight
The recent US NFP report sparked a shift in rate cut expectations, and here’s why that matters: With the market now pricing in 62 basis points of easing by year-end, traders need to be cautious. The soft CPI data suggests inflation might not be cooling as quickly as hoped, which could lead to a reassessment of those rate cut bets. If upcoming economic indicators continue to show mixed signals, we could see volatility in USD pairs, particularly against the Euro and GBP, which are also reacting to their own economic data. Look for key levels around the recent highs in the USD index. If it breaks above those, it could signal a stronger dollar, while a failure to hold could lead to a pullback. Keep an eye on the next CPI release and any Fed commentary, as these will be crucial in shaping market sentiment and could lead to rapid shifts in positions. The real story here is how traders react to the evolving narrative around inflation and interest rates, so stay nimble.
📮 Takeaway
Watch for the next CPI release; a surprise could shift rate cut expectations and impact USD pairs significantly.
