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Powell’s Hawkish Rhetoric Weakens Kiwi, Downside Risks Intensify
Forex
Summary:
Powell’s hawkish pivot has turned NZDUSD structurally bearish. Next week’s NZ labour print is now the critical input for the RBNZ’s policy path. Technically, the rising-wedge break targets a probe of the October cycle lows.
Sell
TradingNZDUSD
EXP
0.57125
Entry Price
0.56000
TP
0.58350
SL
0.57065 -0.00175 -0.31%
0
Point
Flat
0.56000
TP
CLOSING
0.57125
Entry Price
0.58350
SL
Fundamentals
NZDUSD slid sharply last week, driven predominantly by a resurgent U.S. dollar. Chair Powell’s hawkish post-meeting remarks at the October FOMC forced markets to re-price the probability of a December rate cut, propelling the USD higher across the board as Treasury yields jumped. Prior consensus had priced in a third consecutive 25 bp reduction, which was abruptly unwound, weighing on risk assets and commodity prices and dragging the Kiwi lower.
The Chair’s push-back not only reversed NZDUSD’s earlier uptrend but also left a weekly shooting-star candle, flagging downside momentum. Attention now turns to New Zealand’s Q3 labour-market report, the key domestic input for the RBNZ’s 27 November MPS. While the Bank’s inflation-targeting mandate remains paramount, a softening labour market is increasingly guiding its reaction function. The unemployment rate has drifted higher and participation has rolled over, keeping domestic inflationary pressures muted.
Should this week’s release show no sign of a turnaround, priced-in odds for a fourth straight 25 bp cut at the November meeting will harden, and OIS contracts could nudge the terminal cash-rate sub-2%. Conversely, an upside surprise in employment and wage prints would temper easing expectations. The RBNZ’s own projection sees Q3 unemployment at 5.3% and private-sector wages rising 2.1% YoY both consistent with only tepid inflation pressure.
Technical Analysis
NZDUSD’s inverse correlation with U.S. Treasury yields has tightened markedly: the five-day rolling correlations with 2- and 10-year benchmarks are ‑0.92 and ‑0.93, respectively, implying that any backup in Treasury yields is almost mechanically accompanied by Kiwi weakness. Concurrently, the currency exhibits high beta to both offshore CNH and SGX whole-milk-powder futures, underscoring its sensitivity to global cyclical-risk sentiment.
On the daily chart, NZDUSD printed a key reversal candle after stalling near 0.5800 and subsequently broke the rising-wedge support, technically confirming a bearish shift. Layered supports follow at 0.5683, 0.5678 and 0.5640. Momentum gauges align with the down-move: RSI has sliced below its own uptrend line and is drifting away from the neutral zone, while MACD is curling lower and entrenched in negative territory, flagging building downside pressure.
During the day, any bounce that fades ahead of 0.5755 can be treated as a sell-the-rip opportunity, with stops parked just above the level to guard against a reversal. A daily close back above 0.5755 would nullify the near-term bearish setup and reopen a retest of 0.5800.
Overall, the pair remains skewed lower under the double weight of a hawkish Fed and RBNZ easing bets. Unless this week’s labour data deliver a material upside surprise, Kiwi topside is likely to remain capped and the October low remains in play.
Trading Recommendations
Trading Direction: Sell
Entry Price: 0.5725
Target Price: 0.5835
Stop Loss: 0.5600
Valid Until: 18 November, 2025, 23:55:00
Support: 0.5735/0.5710/0.5682
Resistance: 0.5802/0.5820/0.5845
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