NZD/USD bulls move in to maintain control into the roll-over

NZD/USD is up on the day trading higher by 0.67% after correcting a significant amount of the prior bearish impulse. The pair initially fell from a high of 0.6352 to a low of 0.6275 but a weaker greenback leaves the bulls in play for the final hours of the US session. 

Investors are weighing the likelihood that the Federal Reserve will not raise interest rates as aggressively as some had expected following last week's dovish outcome at the Fed meeting. 

WIRP suggests a 50 bp hike on September 21 is fully priced in, with 30% odds of a larger 75 bp move, analysts at Brown Brothers Harriman explained. ''The swaps market is now pricing in 100 bp of tightening over the next 6 months that would see the Fed Funds rate peak near 3.50%, followed by 50 bp of easing over the subsequent 6 months. We cannot believe that the Fed would make such a quick pivot with inflation still well above target and the labour market at full employment.''

The analysts also think that Fed officials will push back against the market’s dovish take on its decision. ''With the media blackout over, prepare for more Fed comments that tilt decidedly hawkish. Evans, Mester, and Bullard speak Tuesday. Mester speaks again Thursday.''

The analysts also noted that, over the weekend, uber-dove Kashkari reiterated that the Fed is focused on lower inflation, noting that “we are committed to bringing inflation down and we’re going to do what we need to do.  We are a long way away from achieving an economy that is back at 2% inflation, and that’s where we need to get to.”  

Meanwhile, the rest of this week in the US will be focused on Nonfarm Payrolls as well as JOLTS.'' With the Fed focused on the labour market, any signs of a turning point may see the market further unwind Fed pricing further, causing more DXY weakness,'' analysts at ANZ Bank said.

NZD/USD technical analysis

The hourly M-formation is playing out with the bulls pushing towards the neckline of the formation and an area of price imbalance, the greyed area, between 0.6340 and 0.6347 that guards the neckline of the pattern and resistance.