NZD/USD: Are We Set For More Bearing Pressure?
After last weeks overreaction from the RBNZ (in my opinion), the Kiwi could be set for another tough week of trading. Last week the RBNZ took a very dovish turn by commenting, that “the next rate move is likely down and balance to inflation has shifted to the downside”. The reason for the dovish turn was down to weaker global economic outlook and reduced momentum in domestic spending.
Kiwi crosses were hammered off the back of this, the majority of the pairs were down from 1.50% to 2% on the day respectively. Taking a look at the daily chart below, we have been range-bound for some time now, since pushing higher from the start of the year. We are currently in the low to midpoint of the wider range we are seeing (0.6725-0.6925), hovering around 0.6825 at the time of writing. Dropping down the hourly-time frame and looking at the 4-hour chart, we seem to be rejecting our EMA nicely and our fib region, which could send the pair back to the lows at 0.6750. If we break through and up our minor resistance level seen at 0.6825/0.6850, this will open the door to work our way back up to the top of the range at 0.69.
Depending on where you have drawn your trend-line, it will either show a fake breakout or a nice bounce off this, this coming US session will give us a clear gauge of how much the Chinese data over the weekend has impacted our risk on/risk off mood. Given the recent bullish run in equities, I wouldn’t be surprised if we see a nice push higher at the open and for this to be the theme for the trading day.