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Fundamental
OverviewThe USD has been weakening
across the board since Tuesday when some comments from USTR Greer suggested
that de-escalation was still the base case. The fall in Treasury yields has
also been a bearish driver for the greenback as the dovish interest rate
expectations increased. Domestically, nothing has
changed for the US dollar as the US government shutdown continues to delay many
key US economic reports. The dollar “repricing trade” needs strong US data to
keep going, especially on the labour market side, so any hiccup on that front
is likely to keep weighing on the greenback. The BLS announced last week
that despite the shutdown, it will release the US CPI report on October 24, so
that’s going to be a key risk event. That will need to be seen in the context
of US-China relations at that time though. If things go south on that front,
then the CPI will not matter much as growth fears will trump everything else. On the NZD side, the RBNZ cut
by 50 bps at the last meeting bringing the OCR to 2.5%, which is the lower
bound of their estimated neutral range (2.5%-3.5%). They kept an easing bias
though as they are trying to “feel their way” as RBNZ’s Conway recently said. On Sunday, we have the New
Zealand Q3 inflation report and that’s going to be important for them as an
upside surprise could give them a reason to skip the November cut. The market
is pricing a 92% probability of a 25 bps cut at the November meeting with a
total of 39 bps of easing expected by the end of 2026. NZDUSD
Technical Analysis – Daily TimeframeOn the daily chart, we can
see that the NZDUSD pulled all the way back into a strong resistance zone
around the 0.5760 level where we can also find the downward trendline for
confluence. The sellers are likely to step in around these levels with a defined
risk above the resistance to position for a drop into the 0.56 handle. The buyers,
on the other hand, will want to see the price breaking higher to pile in for a rally
into the 0.5850 resistance next.NZDUSD Technical
Analysis – 4 hour TimeframeOn the 4 hour chart, we can
see more clearly the resistance zone around the 0.5760 level and the rejection
as the sellers started to step in. There’s not much else we can add here as the
sellers will continue to pile in around these levels, while the buyers will
look for a break higher to extend the pullback into the 0.5850 resistance next.NZDUSD Technical Analysis – 1 hour TimeframeOn the 1 hour chart, we can
see that we have an upward trendline defining the current pullback. If the price
falls into the trendline, we can expect the buyers to lean on it with a defined
risk below it to position for a break above the resistance zone. The sellers,
on the other hand, will want to see the price breaking lower to increase the
bearish bets into the 0.56 handle next. The red lines define the average daily range for today. Upcoming CatalystsWe don’t have
anything on the data front for the rest of the week with the focus remaining
solely on US-China headlines. Note that the New Zealand Q3 inflation report
will be released on Sunday at 21:45 GMT.
This article was written by Giuseppe Dellamotta at investinglive.com.
💡 DMK Insight
The recent weakening of the USD, driven by dovish comments and falling Treasury yields, suggests a growing market sentiment that prioritizes economic stability over aggressive monetary policy. This shift could lead investors to reassess their positions, particularly in risk assets, as a softer dollar may encourage capital flows into equities and commodities. As the landscape evolves, it’s crucial for market participants to remain vigilant about how these dynamics could influence inflation expectations and overall economic growth.
