Uncle Sam is about to drop its latest inflation reports!
How will the release affect NZD/USD’s short-term downtrend?
Before moving on, ICYMI, yesterday’s watchlist looked at GBP/USD’s downtrend ahead of the U.K.’s labor market reports. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
At a conference, RBA Gov. Bullock shared that she doesn’t think the RBA is “falling behind” in its fight against high inflation
Westpac’s Australian leading index improved by 2.7% in December (vs. -2.6% in November); RBA’s rate hike pause “has eased concerns that further hikes are imminent.”
Japan’s producer prices for November: 0.3% y/y (0.1% y/y forecast, 0.9% y/y previous) and marked its slowest pace since February 2021
NAB survey: Australia’s November business confidence fell by 6 pts to -9, business conditions also dropped 4 pts to -9; “Outside of the pandemic period, business confidence is now its weakest since around 2012”
Germany’s wholesale price index: -0.2% m/m (-0.1% m/m forecast, -0.7% m/m previous)
U.K.’s November jobless claimants rose from 8.9K to 16.0K; unemployment rate steady at 4.2% as expected; three-month average wages grew by 7.2% (7.7% forecast, 8.0% previous)
Price Action News
Overlay of GBP vs. Major Currencies Chart by TradingView
The British pound made some waves earlier today after the U.K. printed its November labor market numbers.
The unemployment rate steadied at 4.2% as expected. However, jobless claims almost doubled while the three-month average wages grew way less than the markets had expected.
The U.K.’s weak jobs data might make it harder for the Bank of England (BOE) to sound hawkish on Thursday and it showed in GBP’s price action.
GBP is in the red across the board except against the U.S. dollar. Meanwhile, it’s trading the weakest against JPY, NZD, and AUD.
Upcoming Potential Catalysts on the Economic Calendar:
Eurozone’s ZEW economic sentiment at 10:00 am GMT
German ZEW economic sentiment at 10:00 am GMT
U.S. CPI reports at 1:30 pm GMT
NZ current account at 9:45 pm GMT
Japan’s Tankan indices at 11:50 pm GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
NZD/USD 15-min Forex Chart by TradingView
In case you missed it, a bit of risk-taking earlier this week has lifted NZD/USD from its .6100 December lows.
We’re taking a closer look at the pair now that it’s knocking on the .6160 trend line resistance that marks the top of a descending channel in the 15-minute time frame.
NZD/USD’s first retest of the trend line resulted in a trip back down .6140 but now it looks like the R2 (.6150) Pivot Point is serving as support on the chart.
Today’s U.S. CPI reports could help tell if NZD/USD would extend its December downtrend has seen its last lows.
Traders see the monthly headline CPI stagnating and the annual rate slipping from 3.2% to 3.1% but forecasts also show that core inflation may prove to be sticky.
If the CPI reports come in stronger than expected, then we may see a pro-USD environment that could drag NZD/USD to lower Pivot Point levels.
But if Uncle Sam’s inflation numbers weaken enough to fire up Fed interest rate cut bets, then we could see a pro-risk, anti-USD environment that may bust NZD/USD above its descending channel pattern.
The .6175 and .6200 previous areas of interest may draw in buyers in case of an anti-USD market theme. However, we may also see profit-taking or muted reaction ahead of this week’s FOMC statement.
One possible way to trade this setup is to wait for a clear breakout supported by fundamental drivers. Keep your eyes peeled for a potential break-and-retest situation especially if NZD/USD breaks above its pattern after the U.S. CPI report but before the Fed’s decision.
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