NZDUSD Technical Analysis – The US Dollar is back in the driving seat

Fundamental
Overview

The USD got boosted once
again by negative tariffs news yesterday as Bessent talked about universal tariffs starting at 2.5% and gradually
increasing by the same amount every month, which eventually could reach 20%.
Trump later doubled down on that saying that he wants tariffs much bigger than
2.5%.

The tariffs risk has been
the only thing keeping a bid under the US Dollar after the US inflation data
marked the top in the repricing of rate cuts expectations. So, when this risk
eases, the greenback weakens and vice versa. Today, we have the FOMC decision
where the central bank is expected to keep rates steady. If Fed Chair Powell
sounds more dovish, we could see the greenback weakening again.

On the NZD side, the New Zealand Q4 CPI report last week came in slightly
below expectations although it didn’t change much in terms of market pricing. As
a reminder, the RBNZ cut interest rates by 50 bps as expected at
the last meeting. The market is pricing a 60% chance of a 25 bps cut in
February and a total of 105 bps of easing by year end.

NZDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that NZDUSD seems to be making a broadening wedge at the lows. This is generally a
continuation pattern, so a break below the 0.55 handle could see the sellers
becoming aggressive again. The buyers, on the other hand, will likely step in
around the lows to position for a rally into the 0.57 handle with a better risk
to reward setup.

NZDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a support zone around the 0.5650 level. The buyers will
likely step in here with a defined risk below the level to position for a rally
into new highs. The sellers, on the other hand, will look for a break lower to
increase the bearish bets into the trendline around the 0.5620 level.

NZDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see we have a downward trendline defining the current bearish momentum on this
timeframe. The sellers will continue to lean on it to keep pushing into new
lows, while the buyers will look for a break higher to increase the bullish
bets into new highs. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the FOMC Policy Decision.
Tomorrow, we get the US Q4 GDP report and the latest US Jobless Claims figures.
On Friday, we conclude the week with the US PCE and the US Employment Cost
Index.

This article was written by Giuseppe Dellamotta at www.forexlive.com.