The forex majors are bracing for key central bank events, with the Australian dollar and New Zealand dollar both under pressure ahead of the Reserve Bank of New Zealand (RBNZ) decision. Meanwhile, USD/CAD continues to track higher, maintaining a bullish structure as it approaches the 1.40 handle. Broader sentiment has been influenced by Wall Street weakness ahead of Jerome Powell’s speech at Jackson Hole, a potential market-moving event for the US dollar.
View related analysis:
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Wall Street Futures Slip Ahead of Powell’s Jackson Hole Speech
The Nasdaq 100 led Wall Street futures lower on Tuesday, with traders seemingly squaring their books up ahead of Jerome Powell’s speech at the Jackson hole symposium on Friday. It could prove to be a volatile event, given Jackson Hole has been used as a platform for the Fed to outlay longer-term policy adjustments. Of course, it really boils down as to whether the Fed will succumb to President Trump’s pressure to ease, or stick to their guns and keep rates elevated relative to his very dovish expectations. I suspect it will be the latter scenario.
The Nasdaq 100 led declines, falling 1.4% in its sharpest drop in 12 sessions, while S&P 500 futures lost 0.6%. The Dow Jones bucked the trend with a modest 0.3% gain. Meanwhile, ASX 200 futures rose 0.35%, pointing to a firmer open for the cash index just beneath its record high.
RBNZ Rate Cut in Focus as Monetary Policy Statement Looms
The Reserve Bank of New Zealand (RBNZ) is widely expected to cut the cash rate by 25bp to 3% today, alongside the release of its quarterly Monetary Policy Statement (MPS) containing updated economic forecasts.
In May, the Statement of Monetary Policy (SOMP) projected the cash rate at 2.92% by December, only fractionally above today’s anticipated cut. If that outlook is retained, it suggests only a mild and unconvincing easing bias for another cut in H2. This carries the risk of the New Zealand dollar (NZD) rising on bets that 3% could mark the final cut of the year.
The May SOMP also implied a terminal rate of 2.85% by March, leaving scope for the RBNZ to adjust both the timing and depth of cuts from current expectations—potentially driving NZD higher or lower depending on the tone of today’s statement.
Chart prepared by Matt Simpson, data source: RBNZ SOMP
Forex Majors Technical Outlook: AUD/USD, NZD/USD, USD/CAD
Chart analysis by Matt Simpson - data source: TradingView AUD/USD, NZD/USD, USD/CAD
AUD/USD Pressures Support Ahead of Jackson Hole
The Australian dollar declined for a second day without providing the smaller bounce I had envisaged beforehand. Still, AUD/USD is moving lower in line with my core bias, and could continue down to 64c if I can correct in thinking that the Fed may disappoint doves.
Support has been found around the 200-day EMA (0.6456) for now, though AUD/USD shows the potential to continue lower heading into Jacson hole. It is then down to Jerome Powell as to which way he will send the US dollar and market sentiment in general as we head into the weekend.
NZD/USD Breaks 200-Day EMA as RBNZ Decision Nears
The New Zealand dollar is under pressure ahead of today’s RBNZ rate decision, with NZD/USD breaking beneath its 200-day EMA in anticipation of a cut. A clear swing high has formed below the 0.60 level, and with momentum pointing firmly lower, a retest of the August low looks likely.
Should NZD/USD break beneath that support, the next downside target sits near the monthly S1 pivot, just above the 0.58 handle, reinforcing the bearish outlook for the New Zealand dollar against the US dollar.
USD/CAD Technical Analysis: US Dollar vs Canadian Dollar
AS decent bullish trend has emerged on the daily chart of USD/CAD, I have previously outlined my bullish bias of a move towards 1.4, and it took an important step closer towards that by rallying into the 200-day EMA overnight.
With the 1.3879 high nearby, perhaps we’ll see a little pullback or obligatory shakeout before the anticipated rally continues. But the strong daily trend structure continues to support my view of a move to 1.40.
View the full economic calendar
-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
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