The NZD/USD pair has experienced a rebound, finding buying support near 0.6250 on Wednesday. The Kiwi asset gains traction as the US Dollar Index (DXY) grapples with direction, with market attention focused on the upcoming release of the Manufacturing PMI for December by the United States Institute of Supply Management (ISM) at 15:00 GMT and the Federal Open Market Committee (FOMC) minutes.
Market Dynamics:
Caution in the Market: S&P500 futures remain subdued in the Asian session, reflecting caution among market participants ahead of crucial US economic events. The USD Index consolidates around 102.20 after a sharp recovery, as investors reassess risk sentiment.
Changing Interest Rate Expectations: Bets supporting a 25 basis points interest rate cut by the Federal Reserve (Fed) in March 2024 have decreased. According to the CME Fedwatch tool, the likelihood of an interest rate cut in March has fallen to 67%, down from the 72% projected on Tuesday.
Technical Analysis: NZD/USD in a Rising Channel Pattern
Chart Pattern: The NZD/USD trades within a Rising Channel chart pattern on a four-hour scale. Market participants view each pullback as a selling opportunity, with the broader appeal remaining bullish as long as the asset sustains within the upward-sloping channel.
Moving Averages: The Kiwi asset slips below the 50-period Exponential Moving Average (EMA), indicating a temporary dampening of the near-term upside bias. Traders are advised to monitor the broader channel for potential developments.
RSI Indicator: The Relative Strength Index (RSI) (14) has entered the bearish range of 20.00-40.00. A fresh recovery may materialize with a range shift move in the momentum oscillator.
Trading Strategies:
Investors are encouraged to capitalize on a mean-reversion move towards the lower portion of the Rising Channel chart pattern, approximately at 0.6235. This could result in a recovery move towards the high on December 13, 2023, at 0.6287, followed by the high on January 2, 2024, at 0.6335.
Alternatively, a breakdown below the support near 0.6200 may expose the asset to the high on December 18, 2023, at 0.6170 and the low on December 8, 2023, near 0.6100.
Investors should remain vigilant to potential market developments and adjust their strategies accordingly, considering the impact of key economic events on the NZD/USD pair.
