AUD/USD and NZD/USD Fundamental Daily Forecast – Kiwi Surges as Specs Bet on Aggressive RBNZ Rate Hikes

The Australian and New Zealand Dollars are edging higher following a strong surge the previous session.

Aussie traders are downplaying the weak manufacturing data in November and are instead focusing on the less-hawkish comments from Federal Reserve Chair Jerome Powell the previous session.

Kiwi buyers are playing the bullish divergence in monetary policy between the hawkish Reserve Bank of New Zealand (RBNZ) and the not-so-hawkish U.S. Federal Reserve.

At 03:08 GMT, the AUDUSD is trading .6799, up 0.0011 or +0.17% and the NZD/USD is at .6320, up 0.0023 or +0.36%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $67.13, up $0.94 or +1.42%.

Powell Ignites Late Session Rally after Signaling Smaller Rate Hikes

The AUDUSD and NZD/USD are being underpinned early Thursday after Federal Reserve Chairman Jerome Powell confirmed Wednesday afternoon that smaller interest rate increases are likely ahead even as he sees progress in the fight against inflation as largely inadequate.

Echoing recent remarks from other prominent central bank policymakers and comments at the November Fed meeting, Powell said he sees the Fed in position to reduce the size of rate hikes as soon as next month.

Ahead of Powell’s speech, the markets were pricing in about a 65% chance that the Fed would step down its interest rate increases to half of a percentage point in December. Following Powell’s speech, the probability for a half-point move rose to 77%.

Australian PMI:  Demand Drags Down Manufacturing in November

The Australian Industry Group Australian Performance of Manufacturing Index (Austrian PMI) fell 4.9 points to 44.7 in November, indicating deteriorating conditions. This is the first month of contraction following three months of flat conditions.

“There are now signs of a slowdown in Australian manufacturing. Demand conditions in the market declined in November as deteriorating national and global economic conditions weighed on the industry, “Innes Wilcox, Chief Executive of Ai Group said.

Kiwi Buying Strong as Specs Bet on Another Aggressive RBNZ Rate Hike

Last week, the Reserve Bank of New Zealand (RBNZ) raised its official cash rate by a record 75 basis points to a near 14-year peak of 4.25% as it struggles to contain inflation currently running near three-decade highs.

At this time, the financial markets are leaning toward another hike of 75 basis points in February, and have fully priced in a peak of 5.5% by July next year.

With the RBNZ raising rates in 75 basis point increments and the Fed likely to hike only 50 basis points in December. The NZD/USD has become the most attractive currency, which is why we are seeing it strengthen.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Dollar Rebounds After JOLTs Job Openings Report

Key Insights

  • Euro Area Inflation Rate declined from 10.6% to 10%.
  • USD/CAD pulled back as WTI oil managed to climb above the $80 level. 
  • USD/JPY is moving towards the psychologically important 140 level. 

U.S. Dollar Rebounds From Session Lows

U.S. Dollar Index moved away from session lows after JOLTs Job Openings report indicated that job offers declined from 10.69 million in September to 10.33 million in October, mostly in line with the analyst consensus.

Traders also had a chance to take a look at the Pending Home Sales report, which indicated that Pending Home Sales declined by 4.6% month-over-month in October. High interest rates continue to put pressure on the housing market. This report served as an additional positive catalyst for the U.S. dollar.

Earlier, ADP Employment Change report indicated that private businesses added 127,000 jobs in November, compared to analyst consensus of 200,000. The second estimate of the third-quarter GDP Growth Rate report showed that GDP increased by 2.9% quarter-over-quarter, compared to analyst consensus of 2.7%.

EUR/USD Faced Strong Resistance Near 1.0400

EUR/USD made another attempt to settle above the 1.0400 level but lost momentum and pulled back towards 1.0350.

Today, traders focused on inflation data from the EU. Euro Area Inflation Rate declined from 10.6% in October to 10% in November, compared to analyst consensus of 10.4%. It remains to be seen whether one data point will change ECB’s plans.

EUR/USD

The nearest support level for EUR/USD is located at 1.0320. In case EUR/USD declines below this level, it will head towards the next support at 1.0280. A successful test of the support at 1.0280 will push EUR/USD towards the support at the 20 EMA at 1.0250.

On the upside, the nearest resistance level for EUR/USD is located at 1.0360. If EUR/USD climbs above this level, it will head towards the resistance at 1.0400. This resistance level has already been tested several times and proved its strength. A move above 1.0400 will open the way to the test of the resistance at 1.0440.

GBP/USD Tests Support At 1.1950

GBP/USD continues its attempts to settle below the support level at 1.1950. In case GBP/USD manages to settle below this level, it will have a good chance to gain additional downside momentum.

The recent comments of BoE chief economist Huw Pill, who said that inflation could fall rapidly in the second half of 2023, may put some additional pressure on GBP/USD.

USD/CAD Pulls Back After Yesterday’s Rally

USD/CAD settled in the 1.3500 – 1.3550 range as WTI oil moved above the $80 level.

Other commodity-related currencies are mostly flat today. NZD/USD is trading near the 0.6200 level, while AUD/USD has settled near 0.6700.

USD/JPY Is Heading Towards The Key 140 Level

USD/JPY gained upside momentum and managed to get above the 139.50 level. Today, USD/JPY traders focused on the Housing Starts report from Japan. The report indicated that Housing Starts declined by 1.8% year-over-year, compared to analyst consensus of -1.3%. The disappointing report served as a bearish catalyst for the yen.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD Tests Resistance At 1.3550 As Canada’s Economy Is Slowing Down

Key Insights

  • USD/CAD is moving higher as traders bet that BoC will be more dovish to support the economy. 
  • EUR/USD moved below 1.0350 as Germany’s inflation has started to slow down. 
  • USD/JPY rebounded above the 138.50 level.

USD/CAD Rallied To New Highs After Canada’s GDP Reports

USD/CAD gained upside momentum after the release of Canada’s GDP reports. GDP Growth Rate report indicated that third-quarter GDP increased by 0.7% quarter-over-quarter, compared to analyst forecast of 0.4%. On an annualized basis, third-quarter GDP grew by 2.9%, compared to analyst consensus of 1.5%. Preliminary data showed that Canada’s GDP was flat in October.

USD/CAD

USD/CAD is currently trying to settle above the resistance at 1.3550. In case this attempt is successful, USD/CAD will move towards the next resistance level, which is located at 1.3570. A move above this level will open the way to the test of the resistance at 1.3600.

On the support side, the nearest support level for USD/CAD is located at 1.3500. If USD/CAD declines below this level, it will head towards the next support at 1.3470. A successful test of the support at 1.3470 will push USD/CAD towards the support at 1.3450.

Other commodity-related currencies are moving higher today as commodity markets rebound. AUD/USD made an attempt to settle above 0.6750, while NZD/USD tested the 0.6250 level.

U.S. Dollar Moved Away From Session Lows

U.S. Dollar Index managed to rebound from session lows and is currently trying to settle above the 106.70 level.

House Price Index declined from 11.9% in August to 11% in September, compared to analyst forecast of 10.5%.

Meanwhile, Treasury yields are moving higher, and the yield of 10-year Treasuries is trying to settle above the 3.75% level. In case this attempt is successful, the U.S. dollar will get more support.

EUR/USD Pulls Back As Germany’s Inflation Declined To 10% In November

EUR/USD faced resistance near 1.0400 and pulled back below the 1.0350 level. Today, EUR/USD traders focused on inflation data from Germany.

Germany’s Inflation Rate declined from 10.4% in October to 10% in November. The report served as a negative catalyst for the euro.

GBP/USD Tests Support At 1.1950

GBP/USD  declined towards the 1.1950 level as traders focused on the broad rebound of the U.S. dollar in today’s trading session.

If GBP/USD manages to settle below 1.1950, it will gain additional downside momentum and move towards the next support level, which is located at 1.1900.

USD/JPY Is Moving Towards The 139 Level

USD/JPY received support near the 138 level and is moving towards 139. Japan’s Unemployment Rate remained unchanged at 2.6% in October, compared to analyst consensus of 2.5%.

Japan’s Retail Sales increased by 4.3% year-over-year in October, while analysts expected that Retail Sales would grow by 4.8%.

In the near term, the general dynamics of the U.S. dollar will remain the key catalyst for USD/JPY as the ultra-dovish policy of the BoJ is not expected to change.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Daily Forecast – Rebounding after China Reports Drop in COVID Infections

The Australian and New Zealand Dollars are edging higher on Tuesday after stocks in Hong Kong led gains alongside Chinese indexes. The rebound in Asia and the Pacific Rim areas started when mainland China reported the first decline in daily COVID infections in more than a week on Monday.

The country said local infections, mostly asymptomatic, totaled 38,421, down from a record high of 40,052 reported for Sunday, according to CNBC calculations of Wind Information data.

The last time the daily case count fell from the prior day was on November 19, the data showed.

Additionally, there was no indication of new protests on Monday. Over the weekend, students and groups of people across China held public demonstrations to protest the country’s stringent zero-COVID policy.

At 04:45 GMT, the AUDUSD is trading .6702, up 0.0050 or +0.75% and the NZD/USD is at .6209, up 0.0044 or +0.71%. On Monday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $65.80, down $0.96 or -1.44%.

Both the Aussie and Kiwi have recovered more than half of yesterday’s plunge that was fueled by concerns about unrest over COVID restrictions in China and as hawkish Federal Reserve officials laid out the case for further rate hikes.

NZ Faces ‘Shallow’ Recession as Rates Need to Rise More – Senior Central Banker

New Zealand is likely facing a “shallow” recession as interest rates need to rise further to tame inflation, a top central banker said on Monday, suggesting that a pause in the policy tightening streak was still a distant prospect, Reuters reported.

In an interview, Reserve Bank of New Zealand (RBNZ) Assistant Governor Karen Silk said the central bank would be closely monitoring high frequency data including on spending, business investment and housing when deciding on how much to hike rates when it next meets in February.

Silk said the projected 1% decline in gross domestic product over four quarters would be a “relatively shallow and technical” recession, partly reflecting a weaker global growth outlook.

RBA’s Lowe Sees Better Chance of Australia ‘Soft Landing’ Than Peers

Australia has a stronger probability of bringing its economy in for a “soft landing” than almost any other developed-world counterpart, Reserve Bank Governor Philip Lowe said, citing the nation’s still-contained wage growth, Bloomberg reported.

“It’s not guaranteed but where I sit today I think we have a better chance than most other countries of pulling it off,” Lowe told a parliamentary panel in Canberra on Monday. The best outcome for Australia would be for wages to pick up as they have, but not go too much further, he said.

Short-Term Outlooks

AUDUSD and NZD/USD traders are likely to continue to respond to the friendly news out of China regarding the drop in COVID infections. Prices are likely to remain firm, but we could see an even stronger rally if the news develops into a trend.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Dollar Rebounds From Session Lows

Key Insights

  • U.S. dollar managed to gain upside momentum after testing new lows. 
  • Christine Lagarde said she believed that inflation had not peaked. 
  • USD/JPY moved back above the 138.50 level after testing new lows. 

U.S. Dollar Moves Away From Session Lows As Demand For Safe-Haven Assets Increases

U.S. dollar rebounded from session lows as traders were ready to buy the American currency near multi-month lows.

Currently, the U.S. Dollar Index is trying to settle above the 106 level. In case this attempt is successful, the U.S. Dollar Index will move towards the resistance at 106.40.

EUR/USD Pulls Back After An Unsuccessful Test Of The 1.0500 Level

EUR/USD faced resistance near the 1.0500 level and pulled back towards 1.0430. ECB President Christine Lagarde has recently said that she would be surprised if the Eurozone inflation peaked in October. This comment has not provided additional support to the European currency.

EUR/USD

The nearest resistance level for EUR/USD is located at 1.0440. In case EUR/USD manages to settle above this level, it will move towards the next resistance at 1.0480. A successful test of this level will open the way to the test of the resistance at 1.0500.

On the support side, EUR/USD needs to stay below 1.0440 to have a chance to gain downside momentum in the near term. The next support level for EUR/USD is located at 1.0400. In case EUR/USD declines below this level, it will move towards the support at 1.0360.

GBP/USD Faced Resistance Near 1.2100

GBP/USD  has recently made an attempt to settle above the 1.2100 level but lost momentum and pulled back towards the support at 1.2050.

Today, traders focused on the CBI Distributive Trades report, which declined from 18 in October to -19 in November, compared to analyst forecast of -7. The report highlighted the weakness in the retail sales segment.

USD/CAD Gains Ground As WTI Oil Tests New Lows

USD/CAD tried to settle above the resistance at 1.3470 as WTI oil tested new lows amid protests in China. The protests were triggered by strict COVID-related measures. Oil rebounded from session lows, and USD/CAD pulled back towards 1.3430.

Other commodity-related currencies have also found themselves under pressure today. AUD/USD declined towards the 0.6700, while NZD/USD pulled back towards 0.6200.

USD/JPY Moved Back Above The 138.50 Level

USD/JPY tested new lows at 137.50 but lost momentum and rebounded above the 138.50 level. The broad rebound of the U.S. dollar served as the key driver behind the move.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Dollar Gains Ground As Treasury Yields Rebound

Key Insights

  • U.S. dollar rebounds after the recent pullback. 
  • EUR/USD pulls back despite better-than-expected GDP report from Germany. 
  • USD/JPY managed to settle back above the 139 level.

U.S. Dollar Moves Higher Ahead Of The Weekend

U.S. Dollar Index managed to get back above the 106 level as traders rushed to buy the U.S. dollar after the recent pullback.

There are no important economic reports scheduled to be released in the U.S. today, so traders will focus on general market sentiment.

Treasury yields have moved higher today as the probability of a 50 bps rate hike at the next Fed meeting declined to 71.1%. This move served as a bullish catalyst for the U.S. dollar.

EUR/USD Settled Below 1.0400

EUR/USD declined below the 1.0400 level as traders took profits after the recent rally.

Today, traders focused on the economic data from Germany. The final reading of the third-quarter GDP Growth Rate report indicated that Germany’s GDP increased by 0.4% quarter-over-quarter, compared to analyst consensus of 0.3%.

Consumer Confidence improved from -41.9 in November to -40.2 in December, compared to analyst consensus of -39.6. The better-than-expected GDP Growth Rate report failed to provide enough support to the euro as traders focused on profit-taking ahead of the weekend.

GBP/USD Pulls Back As Traders Take Some Profits Off The Table

GBP/USD pulled back below the 1.2100 level as traders failed to find sufficient catalysts to continue the rebound.

From a big picture point of view, it looks that Rishi Sunak managed to calm markets. GBP/USD has already returned to August levels.

USD/CAD Rebounds After Pullback

USD/CAD managed to gain upside momentum as traders focused on the general strength of the U.S. dollar.

GBP/USD

Currently, USD/CAD is trying to settle above the 1.3400 level. In case this attempt is successful, USD/CAD will move towards the next resistance, which is located near the 50 EMA at 1.3450. A move above 1.3450 will open the way to the test of the resistance at 1.3470.

On the support side, the nearest support level for USD/CAD is located at 1.3360. If USD/CAD declines below this level, it will move towards the next support level at 1.3300. A successful test of the support at 1.3300 will open the way to the test of the support at 1.3230. No important levels have been formed between 1.3230 and 1.3300, so this move may be fast.

Other commodity-related currencies are also under pressure today. AUD/USD declined below 0.6750, while NZD/USD settled below 0.6250.

USD/JPY Settled Back Above The 139 Level

USD/JPY received support near the 138 level and rebounded towards 139.50. The broad rebound of the U.S. dollar served as the main catalyst for the move. In case USD/JPY manages to settle above 139.50, it will move towards the psychologically important 140 level.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forecast – Weak as Investors Book Profits Ahead of Weekend

The New Zealand Dollar is trading lower on Friday after hitting its highest level since August 18 the previous session. The price action suggests investors may be booking profits ahead of the weekend after surging on Wednesday and Thursday in response to a less-hawkish Federal Reserve. Also weighing on the Kiwi is a stronger U.S. Dollar and firmer U.S. Treasury yields.

At 10:44 GMT, the NZD/USD is trading .6247, down 0.0019 or -0.30%.

There are no major economic releases today, but traders may be responding to reports that China’s capital city of Beijing may be grinding to a near standstill due to stricter COVID controls.

The Kiwi is being underpinned by two key factors:  The Fed is turning less-hawkish and the Reserve Bank of New Zealand (RBNZ) has turned more hawkish.

On Wednesday, the Fed minutes revealed that the U.S. central bank could now move in smaller steps, with a 50 basis point rate rise likely next month after four consecutive 75 basis point increases. Meanwhile, on Tuesday the RBNZ announced a historic 75 basis point rate hike with another one to follow in February.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6289 will signal a resumption of the uptrend. A move through .5841 will change the main trend to down.

The minor trend is also up. A trade through .6088 will change the minor trend to down. This will shift momentum.

The NZD/USD is currently testing a long-term retracement zone at .6231 to .6467. On the downside, the first support is a minor 50% level at .6177. The second support is a minor 50% level at .6065.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term Fibonacci level at .6231 is likely to determine the direction of the NZD/USD on Friday.

Bullish Scenario

A sustained move over .6232 will indicate the presence of buyers. Taking out .6289 will indicate the buying is getting stronger. This could trigger an acceleration into the long-term 50% level at .6467.

Bearish Scenario

A sustained move under .6231 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to extend into .6177.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Tests New Highs As Rally Continues

Key Insights

  • U.S. dollar continues to move lower as traders believe that the Fed would slow the pace of rate hikes. 
  • USD/JPY gained strong downside momentum and moved towards the 138 level. 
  • Commodity-related currencies enjoy support in today’s trading session. 

U.S. Dollar Remains Under Pressure

U.S. Dollar Index  remains under pressure as traders stay focused on the recent FOMC Minutes, which indicated that the Fed is leaning towards a “moderate” 50 bps rate hike at the next Fed meeting.

There are no economic reports scheduled to be released in the U.S. today, so traders will focus on general market sentiment. Currently, the U.S. Dollar Index is trying to settle below the 105.70 level. In case this attempt is successful, the U.S. Dollar Index will gain additional downside momentum and move towards the 105.50 level.

EUR/USD Settled Above The 1.0400 Level

EUR/USD managed to get above the 1.0400 level and is trying to gain additional upside momentum.

Today, EUR/USD traders focused on the Ifo Business Climate report from Germany. The report indicated that Germany’s Business Climate improved from 84.5 in October to 86.3 in November, compared to analyst consensus of 85.

It should be noted that Germany’s business sentiment remains at extremely low levels, but the market is ready to interpret any improvement as a bullish catalyst for the European currency.

GBP/USD Tested New Highs

GBP/USD continues to move higher as traders react to the dovish FOMC Minutes.

GBP/USD

Currently, GBP/USD is trying to settle above the resistance at 1.2130. RSI is close to the overbought territory, but there is enough room to gain additional upside momentum in case the right catalysts emerge. If GBP/USD settles above 1.2130, it will move towards the next resistance level at 1.2150. A successful test of this level will push GBP/USD towards the resistance at 1.2185.

On the support side, the nearest support level for GBP/USD is located at 1.2100. A move below this level will open the way to the test of the support at 1.2080. If GBP/USD declines below 1.2080, it will head towards the next support at 1.2050.

Commodity-Related Currencies Continue To Rebound

FOMC Minutes provided material support to commodity-related currencies, which continued to move higher.

AUD/USD managed to settle above the 0.6750 level, while NZD/USD moved above 0.6250. USD/CAD declined towards 1.3325.

USD/JPY Retreats Despite Disappointing PMI Data From Japan

USD/JPY declined towards 138.20 as the strong pullback continued. Today, USD/JPY traders had a chance to take a look at the flash Manufacturing PMI report from Japan.

The report indicated that Japan’s Manufacturing PMI declined from 50.7 in October to 49.4 in November, compared to analyst consensus of 50.8. Numbers below 50 show contraction.

While the report indicated that Japan’s economy was slowing down, the Japanese yen gained ground against the U.S. dollar as traders focused on the potential shift in Fed’s rhetoric after the release of the FOMC Minutes.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Settled Above The Key 1.2000 Level

Key Insights

  • Better-than-expected PMI reports provided support to GBP/USD and EUR/USD. 
  • The disappointing PMI data put pressure on the American currency. 
  • Canadian dollar found itself under pressure amid a strong sell-off in the oil markets. 

U.S. Dollar Retreats After PMI Reports

The U.S. Dollar Index pulled back towards the 106.50 level as traders bet that FOMC Minutes, which will be released today, would show that some Fed members are worried about the negative impact of aggressive rate hikes.

The FedWatch Tool indicates that there is a 71.1% probability of a 50 bps rate hike at the next Fed meeting in December. Traders expect that it will be followed by another 50 bps rate hike in February, and the target rate would reach the 475 bps – 500 bps range.

Any material change in the interest rate expectations will have a significant impact on the U.S. dollar. If FOMC Minutes are somewhat dovish, the American currency will find itself under more pressure.

The recent PMI data has put additional pressure on the U.S. dollar. Manufacturing PMI declined from 50.4 in October to 47.6 in November, while Services PMI decreased from 47.8 to 46.1. Consumer Sentiment decreased from 59.9 in October to 56.8 in November. The weak PMI reports may force the Fed to be less hawkish at the next meeting.

EUR/USD Tests Resistance At 1.0350

EUR/USD gained upside momentum after the release of the Euro Area flash PMI data. Euro Area Manufacturing PMI improved from 46.4 in October to 47.3 in November, while analysts expected that it would decline to 46. Euro Area Services PMI remained unchanged at 48.6, compared to analyst consensus of 48.

Currently, EUR/USD is trying to settle above the 1.0350 level. In case this attempt is successful, EUR/USD will move towards the 1.0400 level.

GBP/USD Rallied Above The 1.2000 Level

GBP/USD enjoyed strong support after the release of better-than expected PMI reports. Manufacturing PMI remained unchanged at 46.2 in November, compared to analyst consensus of 45.8. Services PMI was also unchanged at 48.8, while analysts expected that it would decrease to 48.

GBP/USD

Currently, GBP/USD is trying to settle above the 1.2000 level. In case this attempt is successful, it will move towards the next resistance level at 1.2050. A successful test of the resistance at 1.2050 will push GBP/USD towards the resistance at 1.2080.

On the support side, a move below 1.2000 will push GBP/USD towards the support level at 1.1950. In case GBP/USD settles back below this level, it will head towards the next support level at 1.1900.

USD/CAD Gains Ground Amid A Strong Sell-Off In The Oil Markets

USD/CAD made an attempt to settle above the 50 EMA near 1.3440 as WTI oil declined towards the $78 level.

Other commodity-related currencies managed to gain upside momentum in today’s trading session. AUD/USD moved towards the 0.6700 level, while NZD/USD settled above 0.6200.

USD/JPY Declined Towards The Key 140 Level

USD/JPY pulled back towards the 140 level as traders focused on the general weakness of the U.S. dollar. At this point, it looks that USD/JPY may be extremely sensitive to FOMC Minutes.

For a look at all of today’s economic events, check out our economic calendar.

RBNZ Forecasts Recession in 2023 as it Delivers Historic Supersized Rate Hike

The Reserve Bank of New Zealand (RBNZ) raised its benchmark interest rate by an unprecedented supersized rate hike of 75 basis points on Wednesday, accelerating its monetary tightening to rein in inflation.

The move lifted the Official Cash Rate to 4.25% from 3.5%. It was the biggest hike since the RBNZ introduced the OCR in 1999 and it took the benchmark to its highest level since 2008. The rate hike didn’t come as a surprise, however, with 15 of 21 economists surveyed by Bloomberg predicting the move.

The RBNZ, which had previously predicted the cash rate would peak at 4%, is now forecasting that the rate will continue to rise, peaking at 5.5% next year, and remaining at that level for about 15 months before dropping.

The decision was in contrast with some of its global peers, however, who are becoming more cautious about rate increases amid risks of a global recession. Policymakers had to make the aggressive decision because five straight 50-point hikes failed to curtail stronger-than-expected inflation and near-record low unemployment.

RBNZ Hints at More Hikes Ahead

RBNZ Governor Adrian Orr said that the bank’s sole target is to get the OCR to a point where inflation can be worn down.

“Our core inflation rate is too high,” Orr said in a press conference, adding that the central bank is “well down on the path of the tightening cycle.”

In a separate press release shortly after the decision, the RBNZ said, “Committee members agreed that monetary conditions needed to continue to tighten further.”

RBNZ Forecasts Recession in 2023

The RBNZ also forecast that the country will tip into recession in 2023.

“Inflation is no one’s friend,” Reserve Bank Governor Adrian Orr said in a press conference after the rate hike announcement. “In order to rid the country of inflation we need to reduce spending levels.”

In its monetary statement, the Reserve Bank was also forecasting a recession in 2023, stretching into 2024.

Orr said the bank was predicting a “shallow recession”, with GDP down roughly half a percentage point in the second quarter of 2023, and down around another 0.3 following on from there.

Rate Hike Source of Stress for Homeowners

The latest rate hike is likely to cause major concerns among New Zealand’s highly leveraged homeowners, many of whom are scheduled to refinance their mortgages at far higher interest rates than they had been paying, and have no short-term relief in sight.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Daily Forecast – RBNZ Makes Historic Rate Hike; Aussie Output Contracts

The New Zealand and Australian Dollars are trading mixed on Wednesday on low volume ahead of Thursday’s U.S. bank holiday.

In New Zealand, the central bank raised interest rates as expected. In Australia, Flash PMI data came in below expectations.

In the United States, traders face a plethora of economic data including Durable Goods, Weekly Unemployment, Flash Manufacturing PMI and Non-Manufacturing PMI and New Home Sales.

Additionally, the University of Michigan will release fresh data on Consumer Sentiment and Inflation Expectations.

The major market moving event, however, will be the FOMC Meeting Minutes, due to be released at 19:00 GMT.

At 05:05 GMT, the AUDUSD is trading .6638, down 0.0010 or -0.15% and the NZDUSD is at .6159, up 0.0006 or +0.10%. On Tuesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $65.76, up $0.40 or +0.61%.

Reserve Bank of New Zealand Delivers Record Rate Hike, Signals More to Follow

The Reserve Bank of New Zealand (RBNZ) on Wednesday delivered its biggest interest rate hike and outlined a more hawkish monetary tightening path in coming months as it tries to rein in stubbornly high inflation.

The RBNZ raised the official cash rate (OCR) by 75 basis points to 4.25%, its highest since January 2009. Policymakers also increased the projected peak for the cash rate to 5.5% in September 2023 when it expects it to remain into 2024.

“The OCR needs to reach a higher level, and sooner than previously indicated, to ensure inflation returns to within its target range over the medium term,” the RBNZ said in a statement.

Australian Flash PMI Falls for Second Straight Month

Australian private sector output contracted for a second consecutive month in November, according to a flash PMI report.

The S&P Global Flash Australia Composite Output Index fell from 49.8 in October to 47.7 in November.

Daily Outlook

With the RBNZ rate hike and Aussie PMI data out of the way, traders will now shift their focus to the U.S. economic data and Fed news.

Traders betting on a softer tone from the Fed in December will be looking at today’s U.S. economic reports for weakness in consumer spending on durable goods, manufacturing and services. An increase in weekly jobless claims will also help support the case for a 50 basis point rate hike instead of a 75 basis point move.

Traders will also have the chance to react to the minutes from the last Fed meeting in early November. Traders will be looking for signs of a pivot by Fed officials although recent comments from several policymakers indicate that interest rates will continue to rise.

For a look at all of today’s economic events, check out our economic calendar.

Market Outlook and Review Ahead of RBNZ Rate Decision and a Slew of PMIs

Charts: TradingView

Today Offers a Busy Economic Calendar for Traders and Investors to Work With

First on the menu is the Reserve Bank of New Zealand (RBNZ) Official Cash Rate Decision at 1:00 am GMT. The central bank is poised to increase its Cash Rate by 75 basis points (0.75%) to 4.25%, effectively unleashing its largest rate increase since its inception in 1990.

As of writing, short-term interest rate derivatives shows a 67.1% chance of a 75 basis-point increase, with a 32.9% probability of a 50 basis-point rise. Additionally, according to a Reuters poll, 15 of 23 economists anticipate the RBNZ to hike by 75 basis points (Reuters, 2022). A technical view of the NZD/USD currency pair ahead of the event can be found below.

Another highlight today, of course, are the Flash PMIs out of the eurozone, UK and the US, released throughout European and US trading hours. Focus for the eurozone, however, will be on the German and French PMIs given they remain the largest contributors to the eurozone economy. The French data is released at 8:15 am GMT and 15 minutes later at 8:30 am GMT we will have the German flash numbers.

NZD/USD Offering Short-Term Rangebound Environment

As evidenced from the daily timeframe of NZD/USD, buyers and sellers are squaring off after retesting resistance-turned support from $0.6082. This follows the break of trendline resistance, taken from the high $0.7034. While further upside could be seen in the currency pair over the coming weeks towards resistance from $0.6527, based on these two technical elements, do bear in mind that the trend remains to the downside in terms of price structure (we have yet to see a meaningful higher high and higher low establish).

The picture on the H1 timeframe shows a clear range formed between $0.6064 and $0.6194 (note that the lower edge of the consolidation is accompanied by a 38.2% Fibonacci retracement ratio at $0.6064). Outside of this area calls attention to the $0.62 and $0.60 psychological figures.

Given the daily timeframe has price action rebounding from support at $0.6082, technical studies suggest the H1 timeframe is likely to break the upper edge of the range. Supporting this, traders may acknowledge that H1 price formed a swing low around $0.6087 on 21 November, leaving the lower edge of the aforementioned range unchallenged. This informs market participants that sellers are perhaps growing weaker within the area and may lead to a run higher eventually.

As a result of the above, a breakout above the upper edge of the H1 range ($0.6194) is anticipated.

EUR/USD: Clear Technical Juncture Remains on the Higher Timeframes

Europe’s shared currency snapped a three-day bearish phase on Tuesday, following the earlier rejection from the lower side of the 200-day simple moving average at $1.0401 and resistance at $1.0377 on the daily timeframe (note that this was aided by a near-test of overbought space on the relative strength index [RSI]). Support warrants attention at $1.0090, while engulfing the said resistances throws light on resistance coming in at $1.0602.

The research team noted the following in recent analysis (italics):

Price action on the weekly timeframe has been rooted in an unmistakable bear trend since pencilling in a top in early 2021, with the recent pullback of 10.0% standing as the only notable upside correction since the said trend emerged. Also of technical relevance on the weekly scale is the break of resistance at $1.0298, which, as you can see, is now being retested as support. Overhead, scope is seen to approach Quasimodo support-turned resistance at $1.0778.

Although the trend is beginning to show signs of strength on the daily timeframe (consecutive higher highs/lows), the weekly timeframe clearly shows this market’s trend direction is facing only one way for the time being: south. As such, sellers making a show from daily resistance and the 200-day simple moving average should not surprise.

The question is will weekly buyers hold support at $1.0298, or will daily price continue to fade resistance at $1.0377, in line with the current downtrend.

EUR/USD Short-Term View

Price action on the H1 retested the underside of $1.03 during US hours on Tuesday (as well as a 38.2% Fibonacci retracement at $1.0306), following a rebound from the 1.272% Fibonacci projection at $1.0229. Above $1.03 we can see that we have a 61.8% Fibonacci retracement at $1.0357, followed by $1.04.

References

Reuters, 2022. RBNZ set to deliver biggest rate hike ever as it eyes three month break.

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USD/CAD Pulls Back As WTI Oil Rebounds

Key Insights

  • The continuation of WTI oil’s rebound provided material support to the Canadian dollar and other commodity-related currencies. 
  • EUR/USD managed to settle above the 1.0250 level. 
  • USD/JPY found itself under pressure after the strong rally. 

U.S. Dollar Pulls Back After Yesterday’s Rally

The U.S. Dollar Index is trying to settle below the 107.50 level as traders take some profits off the table after yesterday’s rally.

Treasury yields are moving lower, and the yield of 10-year Treasuries has recently managed to settle back below the 50 EMA at 3.80%.

If the yield of 10-year Treasuries declines below 3.75%, it will head towards the support level at 3.67%, which will be bearish for the American currency.

EUR/USD Gains Ground As Euro Area Consumer Confidence Exceeds Expectations

EUR/USD settled above the 1.0250 level and is trying to develop additional upside momentum after the release of the Euro Area Consumer Confidence report.

The report indicated that Consumer Confidence improved from -27.6 in October to -23.9 in November, compared to analyst consensus of -26.

While Consumer Confidence remains at low levels, the better-than-expected report may provide some support to the European currency.

GBP/USD Moves Towards The 1.1900 Level

GBP/USD has recently made an attempt to settle above the 1.1900 level as traders rushed to buy the pound after yesterday’s pullback.

GBP/USD

If GBP/USD manages to settle above 1.1900, it will head towards the next resistance level, which is located near the recent highs at 1.1950. A successful test of this level will open the way to the test of the resistance at 1.2000.

On the support side, the nearest support level for GBP/USD is located at 1.1855. In case GBP/USD declines below this level, it will head towards the next support level at 1.1830. A move below 1.1830 will push GBP/USD towards the support at 1.1790.

USD/CAD Retreats As Oil Markets Continue To Rebound

USD/CAD declined below the 1.3400 level as WTI oil continued to rebound after yesterday’s sell-off, which was caused by reports about a potential production increase from Saudi Arabia. These reports were refuted by Saudi Energy Minister Prince Abdulaziz bin Salman.

Today, USD/CAD traders also focused on the economic data from Canada. Retail Sales declined by 0.5% month-over-month in September, while Wholesale Sales increased by 1.3% in October. New Housing Price Index declined by 0.2% month-over-month in October.

Other commodity-related currencies have also moved higher today. NZD/USD rebounded towards the 0.6150 level, while AUD/USD settled back above 0.6620.

USD/JPY Declined Below 141.50

USD/JPY faced resistance near 142.25 and pulled back below the 141.50 level. There were no important economic reports in Japan today, and it looks that profit-taking was the main driver behind the strong pullback.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Daily Forecast – Kiwi Firms Ahead of Historic RBNZ Rate Decision

The Australian and New Zealand Dollars are edging higher on Tuesday on light volume as many of the major market players take to the sidelines ahead of Thursday’s U.S. bank holiday. The trading range is also tight during this holiday-shortened week, as investors awaited further clues about the Federal Reserve’s monetary policy plans and fretted over the outlook for inflation.

In the meantime, Australian Dollar traders will get a chance to react today’s speech by Reserve Bank (RBA) Governor Philip Lowe. New Zealand Dollar traders are bracing for Wednesday’s Reserve Bank (RBNZ) interest rate and policy announcements.

At 09:01 GMT, the AUDUSD is trading .6613, up 0.0007 or +0.11% and the NZDUSD is at .6123, up 0.0025 or +0.40%. On Monday, the InvescoCurrency Shares Australian Dollar Trust ETF (FXA) settled at $65.35, down 0.66% or -0.99%.

The Aussie, which is often used as a liquid proxy for the Chinese currency, is also tracking gains in the Yuan. The Chinese currency retreated 1% early Tuesday, testing its lowest level in more than a week on concerns about spreading COVID curbs in China as infections surged, before rebounding higher into the close.

RBA Governor Lowe in Focus

Reserve Bank of Australia Governor Philip Lowe is currently giving a speech titled “Price Stability, the Supply Side and Prosperity” at a dinner event on Tuesday. Traders are looking for any signs of a pause in interest rate hikes in the upcoming policy meetings.

New Zealand Posts Monthly Trade Deficit in October

New Zealand posted a monthly trade deficit of NZ$2.129 billion in October, data from Statistics New Zealand showed on Tuesday, while the annual deficit was NZ$12.88 billion.

Exports totaled NZ$6.14 billion for the months while imports were NZ$8.27 billion.

RBNZ Seen Raising Rates by Historic 75 Basis Points

The Reserve Bank of New Zealand is expected to raise its benchmark interest rate by 75 basis points for the first time ever on Wednesday to cool multi-decade high inflation, ramping up the speed of an already aggressive monetary tightening campaign, a Reuters poll found.

Inflation at 7.20% is well above the central bank’s target range of 1-3%, which along with a tight labor market has prompted economists to predict a higher peak for the official cash rate (OCR), currently at 3.50%.

Short-Term Outlook

On Tuesday, traders will be closely watching further comments from Fed officials. On Wednesday, the key event will be the RBNZ interest rate and monetary policy announcements. Also on Wednesday, traders will get the opportunity to react to U.S. Flash Manufacturing and Non-Manufacturing PMI, durable goods orders and new home sales figures. The minutes from the Fed’s November meeting will also be published and could provide further insights on the strength of the U.S. economy.

On Thursday, the U.S. markets will be closed for the Thanksgiving Day holiday.

U.S. Dollar Rallies As Demand For Safe-Haven Assets Grows

Key Insights

  • U.S. dollar continues to rebound against a broad basket of currencies as traders focus on the problems with coronavirus in China.
  • EUR/USD pulled back towards the 1.0250 level. 
  • Commodity-related currencies have found themselves under strong pressure amid a broad sell-off in commodity markets. 

U.S. Dollar Starts The Week On A Strong Note

U.S. Dollar Index gained upside momentum and moved above the 107.50 level as traders reacted to the return of strict COVID curbs in China.

Previously, markets hoped that China would slowly relax its anti-coronavirus policy, boosting growth and providing support to riskier assets.

However, the rapid increase in the number of coronavirus cases in China leaves little hope for any relaxation of the curbs anytime soon, which is bullish for the U.S. dollar.

EUR/USD Declined Towards 1.0250

EUR/USD is currently trying to settle below the 1.0250 level as traders continue to move out of the European currency after the recent rally.

EUR/USD

If EUR/USD manages to settle below 1.0250, it will head towards the next support level, which is located at 1.0220. A successful test of the support at 1.0220 will open the way to the test of the support level at 1.0190.

On the upside, the nearest resistance level for EUR/USD is located at 1.0275. In case EUR/USD manages to settle above 1.0275, it will head towards the next resistance at 1.0300. A move above 1.0300 will push EUR/USD towards the resistance at 1.0325.

GBP/USD Is Losing Ground At The Start Of The Week

GBP/USD pulled back towards the 1.1800 level as traders focused on the general strength of the U.S. dollar.

Treasury yields have been moving lower today, but traders ignored this move and remained focused on the situation in China.

The nearest support level for GBP/USD is located at 1.1790. In case GBP/USD declines below this level, it will move towards the next support level at 1.1760.

AUD/USD Retreats Amid A Strong Sell-Off In Commodity Markets

AUD/USD is testing the 0.6600 level as commodity markets pull back at the start of the week. The strong sell-offs in the oil and palladium markets have hurt the commodity market sentiment.

Other commodity-related currencies are also moving lower. NZD/USD is currently trying to settle below the 0.6100 level. USD/CAD has recently managed to get above the 50 EMA at 1.3450.

USD/JPY Tested The 142 Level

USD/JPY managed to get above the key resistance at 140.60 and made an attempt to settle above the 142 level.

The yen remains fundamentally weak due to the ultra-dovish policy of the BoJ, so it’s not surprising to see that USD/JPY rallied when the U.S. dollar started to rebound against a broad basket of currencies.

For a look at all of today’s economic events, check out our economic calendar.

Trade of the Week: Kiwi to Reach 200-day SMA on Record RBNZ Hike?

NZD in Q4: By the Numbers

NZD has a quarter-to-date gain against all of its G10 and Asian peers.

Here’s a sample:

  • NZD up 3.1% against GBP
  • NZD up 4.4% against EUR
  • NZD up 5.3% against AUD
  • NZD up 6.5% against JPY
  • NZD up 8.5% against USD

(% performance since September 30th till time of writing)

Even going slightly further back, for the second half of this year so far, the kiwi only has declines against FX safe havens such as the US dollar, Swiss Franc, Singapore dollar, and the Hong Kong dollar (HKD is pegged to USD).

What’s Driving NZD’s Outperformance of Late?

Markets are forecasting a 64% chance that the RBNZ will trigger a 75-basis point hike this week.

If so, that which would be the RBNZ’s largest ever hike since its official cash rate was rolled out in 1999!

And a record hike would only add to cumulative hikes by this central bank, having already raised its official cash rate by 325 basis points (bps) since October 2021, including 50-basis points at each of its past five meetings.

Generally speaking, the higher interest rates go in an economy relative to its peers, the stronger its currency.

Why Would the RBNZ Need to Trigger a Record Hike?

A larger 75bps hike may be needed to keep consumer prices from rising uncontrollably.

Note that a central bank’s main weapon against runaway consumer prices is by raising interest rates to “destroy” demand in the economy.

Keep in mind:

  • New Zealand’s consumer price index (CPI) for the third quarter rose by 7.2% compared to 3Q 2021.
  • That 7.2% figure was above the median forecast of 6.5%, with the former number being near its highest levels since 1990!

And that’s even with all of the RBNZ’s hikes that have been incurred over the past year which apparently are having little impact on the inflation scourge so far.

Hence, NZD has been lifted on the wings of expectations that the RBNZ may well send its benchmark rates higher than previously anticipated.

Markets are now forecasting that New Zealand’s interest rates will keep rising from the 3.5% level at present before peaking around 5.15% by mid-2023.

And this has been an opportune time for NZD bulls to take advantage of the US dollar’s pullback, with markets expecting that the Fed is getting closer to being down with its own US rate hikes.

But if the RBNZ actually opts for a 50-bps hike this week instead, that may disappoint NZD bulls who had been hoping for that larger 75bps hike, potentially prompting them to unwind some of NZD’s recent gains.

Can NZD/USD Reach 200-day SMA?

At present, markets are forecasting only a 16% chance of NZDUSD the 0.63 mark, around where the kiwi’s (nickname for NZDUSD) 200-day simple moving average currently lies.

After all, Kiwi bulls (those hoping NZDUSD can climb higher) are already encountering resistance around the 0.62 psychological area, which has been a key battle region between bulls and bears since May.

Looking at a key technical indicator, NZDUSD’s 14-day relative strength index (RSI) is also pulling back from the 70 threshold which typically denotes overbought conditions, suggesting that the NZD’s ascent has gone too far.

To the downside lies its 100-day SMA, just above the 0.60 mark, which may offer underlying support should the RBNZ disappoint this week or if the US dollar’s catches fresh safe haven bids.

Markets are currently forecasting a 41% chance of 0.60 being attained by Kiwi bears for the next one-week period.

To recap, NZDUSD’s performance this week may all come down to the following key events:

  • the size of the RBNZ’s actual cash rate hike
  • RBNZ’s outlook for the cash rate going into 2023
  • Fed meeting minutes released on Wednesday/scheduled speeches by Fed officials this week

And on that final point above, let’s take a brief look at the USD half of NZDUSD.

Noting that this week is absent of tier-1 US economic data, the US dollar could react to fresh policy clues out of the FOMC meeting minutes and the Fed speakers due before the Thanksgiving break.

Should the US dollar relinquish its gains at the onset of this week, on renewed hopes that the Fed is closer to being down with its own rate hikes, that could make NZDUSD’s path towards its 200-day SMA a lot easier.

For more information visit FXTM.

NZD/USD Forex Technical Analysis – Traders Expecting RBNZ to Deliver Big Rate Hike on Wednesday

The New Zealand Dollar is edging lower on Monday, but inside yesterday’s range. Capping the currency is a stronger U.S. Dollar. The limited losses may be attributed to expectations for a hawkish policy update from the Reserve Bank of New Zealand (RBNZ) on Wednesday.

At 06:17 GMT, the NZD/USD is trading .6131, down 0.0019 or -0.31%.

Fed Hawks Limiting Gains

Last week was a busy one for Fed speakers with over a dozen Fed officials offering their latest views on the economy, jobs, inflation and current policy settings.

Most policymakers delivered the clearly hawkish message – inflation has not meaningfully softened, more work is needed, and interest rates will stay higher for longer.

RBNZ Could Go Supersized on Wednesday

Unlike other central banks, the RBNZ could step-up to a 75 basis point hike given the mix of recent strong CPI and jobs numbers and rising inflation expectations.

Financial futures traders are pricing in a 50/50 chance of 75 basis points versus 50 basis points. According to a Reuters poll, however, 15 of 23 economists surveyed predict a 75 basis point rate hike, which would bring the Official Cash Rate to 4.25%.

Daily NZD/USD

 Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6206 will reaffirm the uptrend. A move through .5841 will change the main trend to down.

The minor trend is also up. A trade through .6065 will change the minor trend to down. This will also shift the momentum.

The minor range is .6065 to .6206. The NZD/USD is currently straddling its pivot at .6136.

On the upside, the nearest resistance is a long-term Fibonacci level at .6232. On the downside, the support is a pair of 50% levels at .6023 and .5990.

Daily Swing Chart Technical Forecast

Trader reaction to .6136 is likely to determine the direction of the NZD/USD on Monday.

Bearish Scenario

A sustained move under .6135 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the minor bottom at .6065. Taking out this level will likely lead to a test of the 50% levels at .6023 and .5990.

Bullish Scenario

A sustained move over .6136 will signal the presence of buyers. If this generates enough upside momentum then look for a test of .6206, followed by the long-term Fibonacci level at .6232. This is a potential trigger point for an acceleration to the upside.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD Tests Resistance At 1.3400 As WTI Oil Remains Under Strong Pressure

Key Insights

  • The sell-off in oil markets put pressure on the Canadian dollar. 
  • GBP/USD gained upside momentum as UK Retail Sales exceeded expectations. 
  • USD/JPY pulled back as Japan’s Inflation Rate touched new highs. 

USD/CAD Rebounds As WTI Oil Settles Below The Key $80 Level

USD/CAD moved towards the 1.3400 level as the strong sell-off pushed WTI oil towards $78. Today, USD/CAD traders also had a chance to take a look at Producer Prices data from Canada. The reports indicated that PPI increased from 9.1% in September to 10.1% in October, compared to analyst consensus of 7.8%.

USD/CAD

Currently, USD/CAD is trying to settle above the resistance at 1.3400. In case this attempt is successful, it will move towards the 50 EMA at 1.3450. A move above the 50 EMA will open the way to the test of the resistance at 1.3470.

On the support side, the nearest support level for USD/CAD is located at 1.3360. If USD/CAD settles back below this level, it will move towards the next support level, which is located near the recent lows at 1.3300.

Other commodity-related currencies have shown mixed performance today. AUD/USD declined towards 0.6670, while NZD/USD managed to rebound towards the 0.6150 level.

U.S. Dollar Gains Some Ground Ahead Of The Weekend

U.S. dollar is gaining some ground against a broad basket of currencies today as Treasury yields continue to move higher.

Today, traders focused on the Existing Home Sales report for October, which indicated that Existing Home Sales declined by 5.9% on a month-over-month basis. The report is not surprising as high interest rates put significant pressure on the housing market.

EUR/USD Faced Strong Resistance At 1.0400

EUR/USD declined below the 1.0350 level after another unsuccessful attempt to settle above the resistance level at 1.0400.

Government bond yields in the Eurozone continue to move lower, which is a positive development. Back in October, a potential debt crisis was a real risk for the EU.

Meanwhile, traders are focused on general market sentiment towards the U.S. dollar. At this point, it looks that EUR/USD does not have enough catalysts to get above the 1.0400 level in the last trading session of the week.

GBP/USD Tries To Settle Above 1.1900 As Retail Sales Exceed Expectations

GBP/USD is currently trying to settle above the 1.1900 level as traders remain bullish on the pound ahead of the weekend.

Yesterday’s pullback was quickly bought, and it looks that recent economic reports from the UK provided some support to the pound.

Gfk Consumer Confidence improved from -47 in October to -44 in November, compared to analyst consensus of -51. Retail Sales increased by 0.6% month-over-month in October, while analysts expected that they would increase by 0.3%.

USD/JPY Pulls Back As Traders React To Japan’s Inflation Data

USD/JPY moved back below the 140 level as bulls failed to push it above the important resistance at 140.60.

Japan’s inflation reports provided additional support to the yen. Inflation Rate increased from 3% in September to 3.7% in October, while Core Inflation Rate grew from 3% to 3.6%. Both reports exceeded analyst estimates.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – RBNZ Seen Supersizing Official Cash Rate Hike

The New Zealand Dollar is trading higher against its U.S. counterpart on Friday amid reports that the Reserve Bank (RBNZ) will hike rates by 75 basis points for the first time ever on Wednesday to cool multi-decade high inflation, ramping up the speed of an already aggressive monetary tightening campaign, according to a Reuters poll.

At 10:18 GMT, the NZD/USD is trading .6176, up 0.0046 or +0.75%.

Big Banks Expect Supersized Rate Hike

Inflation at 7.20% is well above the Reserve Bank of New Zealand (RBNZ) target range of 1-3%, which, along with a tight labor market has prompted economists to predict a higher peak for the official cash rate (OCR), currently at 3.50%.

The largest banks in the country – ANZ, ASB, Kiwi Bank, Bank of New Zealand and Westpac – expect a 75 bp hike on Wednesday, matching the recent pace of the U.S. Federal Reserve. Interest rate futures are pricing a roughly 60% chance of that happening.

“Since the RBNZ’s last decision in October, inflation and expectations of inflation have surprised on the upside,” said Jarrod Kerr, chief economist at Kiwibank. “And wage growth is accelerating.”

“We expect to see an outsized 75 bp hike to 4.25%, and they won’t stop there,” he added. “We’re likely to see a 5% cash rate next year.”

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6203 will signal a resumption of the uptrend. A move through .5841 will change the main trend to down.

The minor trend is also up. A trade through .6065 will change the minor trend to down. This will shift momentum to the downside.

The minor range is .6203 to .6065. The NZD/USD is currently trading on the bullish side of its pivot at .6134, making it support.

On the upside, the nearest resistance is a long-term Fibonacci level at .6232. On the downside, the key support is at .5990.

Daily Swing Chart Technical Forecast

Trader reaction to .6134 is likely to determine the direction of the NZD/USD on Friday.

Bullish Scenario

A sustained move over .6134 will indicate the presence of buyers. The first upside target is the minor top at .6203, followed by .6232 and a main top at .6251. The latter is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under .6134 will signal the presence of sellers. This could trigger a break into the minor bottom at .6065, followed by a 50% level at .5991.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Dollar Rebounds As Bullard Says Fed May Need To Raise Rates By 100 Bps

Key Insights

  • U.S. dollar rebounds after the recent sell-off. 
  • GBP/USD declines after Jeremy Hunt presents a new fiscal plan for the UK. 
  • AUD/USD is under strong pressure amid a broad pullback in commodity markets.

U.S. Dollar Rallies As Bullard’s Comments Show That Fed Remains Hawkish

U.S. Dollar Index rebounded towards the 107 level as traders reacted to hawkish comments from Fed’s Bullard. St. Louis Federal Reserve President Bullard said that the interest rate had not reached the sufficiently restrictive level. According to Bullard, the Fed may need to raise rates by at least another full percentage point.

Traders also focused on the economic data from the U.S. Housing Starts declined by 4.2% month-over-month in October, while Building Permits decreased by 2.4%. High interest rates continue to put pressure on the housing market.

Initial Jobless Claims report indicated that 222,000 Americans filed for unemployment benefits in a week, mostly in line with the analyst consensus. Philadelphia Fed Manufacturing Index declined from -8.7 in October to -19.4 in November.

Treasury yields rebounded after the recent sell-off, providing material support to the U.S. dollar. In case this rebound continues, the U.S. Dollar Index will have a good chance to settle above 107.

EUR/USD Failed To Settle Above 1.0400

EUR/USD pulled back towards 1.0340 as traders continued to take profits after the recent rally.

The final reading of the Euro Area Inflation Rate report indicated that Inflation Rate increased from 9.9% in September to 10.6% in October, compared to analyst consensus of 10.7%.

This minor adjustment does not change the big picture for the Eurozone, which is under significant pressure due to high energy prices.

GBP/USD Retreats As Traders Worry That New Fiscal Measures Would Hurt The Economy

It was a big day for GBP/USD traders as British finance minister Jeremy Hunt presented the new fiscal plan. Valued at 55 billion pounds, the plan includes tax hikes and spending cuts.

The market is worried that the new plan would put too much pressure on the British economy, which is already in recession that is set to continue in 2023.

GBP/USD

Currently, GBP/USD is trying to settle below the support at 1.1790. In case this attempt is successful, it will move towards the next support level at 1.1760. A successful test of the support at 1.1760 will push GBP/USD towards the support at 1.1730.

On the upside, the nearest resistance for GBP/USD is located at 1.1830. If GBP/USD manages to settle back above this level, it will move towards the resistance at 1.1855.

AUD/USD Is Under Strong Pressure

AUD/USD declined towards the 0.6650 level amid a broad sell-off in commodity markets.

Other commodity-related currencies have also found themselves under pressure. NZD/USD settled below the 0.6100 level, while USD/CAD made an attempt to settle above 1.3400.

USD/JPY Gets Back Above The Key 140 Level

USD/JPY settled above the 140 level and is trying to settle above the resistance at 140.60.

The hawkish comments from Fed’s Bullard reminded traders about the huge difference between the policies of BoJ and Fed. In case USD/JPY settles above 140.60, it will have a good chance to develop sustainable upside momentum.

For a look at all of today’s economic events, check out our economic calendar.