NZD/USD bounces back from 0.6050 in anticipation of US services PMI and New Zealand employment data.

FUNDAMENTAL OVERVIEW:

• Bouncing off 0.6050, NZD/USD rebounds as the US Dollar faces challenges in extending its recovery before the release of US Services PMI data.
• The prevailing market sentiment remains subdued due to strong labor demand in the US, reducing the likelihood of an early rate cut by the Fed.
• If New Zealand Employment data disappoints, it could prompt RBA policymakers to adopt a more dovish policy stance.

Finding support around 0.6050, the NZD/USD pair recovers to approximately 0.6080 during the London session. Despite this bounce, the short-term perspective for the New Zealand dollar remains bearish, as it lingers close to a two-month low following a decline triggered by positive United States Nonfarm Payrolls (NFP) data for January, diminishing expectations of prompt rate cuts by the Federal Reserve (Fed).

S&P500 futures register notable declines during the European session, reflecting a waning market appetite for risk. The US Dollar Index (DXY) remains stable above 104.00 as market participants await the US ISM Services PMI release for January at 15:00 GMT. The Services PMI, a crucial indicator for the service sector comprising two-thirds of the economy, is expected to rise to 52.0 from December’s 50.6.

Concerning the New Zealand Dollar, investors are anticipating the Q4 Employment data set to be released on Tuesday. Projections suggest a significant rise in the Unemployment Rate to 4.3%, up from 3.9% in Q3 2023, while the Labor Cost Index is expected to maintain a consistent growth rate of 0.8%. Should the labor market data reveal negative trends, Reserve Bank of New Zealand (RBNZ) policymakers might contemplate early rate cuts.

NZD/USD TECHNICAL ANALYSIS DAILY CHART:

Technical Overview:

NZD/USD is trading within a down channel.

NZD/USD is positioned below all the Moving Averages (SMA).

The Relative Strength Index (RSI) is in the Selling zone, while the Stochastic oscillator suggests a Negative trend.

Immediate Resistance level: 0.6095

Immediate support level: 0.6063

HOW TO TRADE NZD/USD

After a notable upward surge, NZD/USD encountered resistance, leading to a decline. Presently, the currency pair has established a head and-shoulders pattern and is currently trading near a crucial support zone. A further breakdown of this zone could potentially result in additional declines.

TRADE SUGGESTION- STOP SELL– 0.6056, TAKE PROFIT AT- 0.5995, SL AT- 0.6103.