NZD/USD bulls running out of steam at 0.7260 wall

The NZD/USD is forming a head and shoulder pattern on the 1-hour chart.
The RBNZ leaves the rate unchanged at 1.75% for 16 months in a row.

Flavio Tosti Independent Analyst

The NZD/USD is trading at around 0.7228 virtually unchanged on the day so far as the market is digesting yesterday’s Fed rate hike. While most participants where very upbeat and expecting four rates in 2018, the market was disappointed and preferred selling the US dollar across the board.

In a note, Peter Hooper from Deutsche Bank insists on the importance of wage inflation to justify hiking rates: “The Committee (FOMC) is likely going to need to see evidence that wage and price inflation are picking up meaningfully before becoming concerned about significant overheating associated with the tightening labor market.”

On the Kiwi side of the news, this Wednesday a little after the Fed, the Reserve Bank of New Zealand decided to leave interest rates at a record low at 1.75% for a 16 month in a row. Additionally, Adrian Orr will be appointed as Reserve Bank Governor, effective from March,27.

Capital Economics analysts say that Orr might provide change at the RBNZ: “RBNZ Governor Grant Spencer finished his six-month term without any fireworks … reiterating that rates are unlikely to rise until the second half of 2019. The new Governor Adrian Orr is unlikely to begin with a bang when he takes over on Tuesday, not least because he will have to deal with a slowing economy and not enough inflation, but we can’t completely dismiss the possibility that he shakes things up a little.”

According to ANZ, the RBNZ will have to hike at some point: “With inflation ‘forecast to trend upwards’ over the medium term (looking through an expected near-term weakening) the RBNZ is treading water with regards to monetary policy … The RBNZ’s next move is expected to be a hike, but the RBNZ is being careful to not give that signal prematurely, given the market’s tendency to pre-empt.”

NZD/USD daily chart:

The NZD/USD bounced Wednesday after establishing a low at 0.7154. Buyers tried to lift the market up on Thursday but the price is currently back int yesterday’s range. On the daily chart the bulls are losing momentum as the market is trading below its 55-period simple moving average and the MACD indicator is bearishly configured.

NZD/USD 1-hour chart

The NZD/USD found resistance at the 200-period simple moving average on the 60-minute chart. Investors are weighing whether yesterday’s move up was an over-reaction to the Fed announcing only three rate hikes in 2018. Support is seen at 0.7200 which has been major pivots those last months; followed by 0.7154 which is yesterday’s low. Intraday resistance is then seen at 0.7240 where the market will try to create a head and shoulder pattern; followed by the high of the day 40 pips higher at 0.7260. If the level is broken to the upside we can look at the 0.7300 supply level.

Author

Flavio Tosti

Independent Analyst

AUD/USD bulls regain control above 0.6950 amid USD retreat

AUD/USD regains traction and extends the previous day's bounce from the weekly low, aiming for 0.7000 in Asia on Friday. The overnight pullback in US bond yields keeps the US Dollar below an 18-month high, which in turn offers some support to the pair. Meanwhile, hawkish RBA expectations also keep the major underpinned.

USD/JPY holds gains near 158.00 after Japan's weak Household Spending data

USD/JPY clings to gains around 158.00 after data showed on Friday that Japan's Household Spending fell for the ninth straight month, undermining the Japanese Yen. Meanwhile, the US Dollar remains depressed as the overnight fall in US bond yields counters a hawkish Fed and geopolitical uncertainties, could cap any downside in the pair.

Gold remains range-bound below $4,200

Gold has given up some ground after an initial bullish attempt to reach weekly highs, returning to below the $4,200 mark per troy ounce on Friday. The US Dollar’s strong upside momentum, combined with rising US Treasury yields across the curve, seems to keep further gains in the yellow metal under scrutiny.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?

The Euro is not the sick man of Europe. France's bond market is

EUR/USD remains under pressure, near the 17-month low of 1.1161 reached on Monday. The pair has lost more than 7% since its yearly peak, as concerns over France's public finances increasingly weigh on the single currency. But behind the weakness of the Euro (EUR), the problem does not necessarily lie with the European economy as a whole.