Kiwi Surges as US-China Deal Pressures US Dollar Following CPI

UPDATE: The New Zealand Dollar (NZD) is experiencing a significant surge against the US Dollar (USD) following a preliminary trade deal between the US and China. The US dollar is under pressure after a disappointing consumer price index (CPI) report released last Friday, which has led to a shift in market dynamics.

The recent trade agreement has ignited a positive risk sentiment globally. As a result, the USD continues to lag, pushing investors towards riskier assets like the Kiwi. Analysts warn that this risk-on sentiment is likely to weigh on the dollar in the short term, particularly ahead of tomorrow’s highly anticipated FOMC policy decision.

In a developing situation, the Federal Reserve is expected to cut interest rates by 25 basis points and signal an end to quantitative tightening (QT). However, with no major US economic data on the horizon, the Fed’s announcement is anticipated to be a non-event. There is currently a 91% probability of another rate cut in November, following the Reserve Bank of New Zealand’s (RBNZ) decision to lower the official cash rate to 2.5% last meeting.

Market analysts are closely watching the NZD/USD pair as it recently broke above the critical 0.5780 resistance level. This breakthrough has triggered a buying spree, with traders positioning for a rally towards the next resistance target at 0.5850.

On the daily chart, the bullish momentum is clearly defined by a rising trendline. A potential pullback towards this trendline could see buyers stepping in, aiming to maintain upward pressure. Conversely, sellers are poised to capitalize on any decline below the 0.5780 support to target new lows.

In the shorter term, the 1-hour chart suggests that buyers are likely to re-enter the market around the support level and trendline, while sellers will be on the lookout for any downside breakouts to push the price lower.

Tomorrow, the FOMC will announce its policy decision, and on Thursday, the highly publicized meeting between President Trump and President Xi is set to take place, which could further influence market sentiment.

As the situation unfolds, traders and investors are advised to remain vigilant. The fluctuating dynamics between the NZD and USD could have profound implications on both economies, making this a critical time for financial markets worldwide. The developments in the coming days will be crucial as they may set the stage for future monetary policies and trading strategies.

Stay tuned for further updates as this story develops.