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With action likely to find the Kiwi soon thanks to the upcoming RBNZ monetary policy statement, we’re checking out NZD/USD for different technical setups to watch out for.

Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at USD/CAD ahead of U.S. inflation updates, so be sure to check that out to see if there is still a potential play!

Intermarket Update:

Equity Markets Bond Yields Commodities & Crypto
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Fresh Market Headlines & Economic Data:

Dow slips from record as hot inflation report overshadows strong earnings

U.S. Inflation climbs higher than expected in June as price index rises 5.4%

U.S. small business optimism rises despite labor shortage, inflation worries – NFIB

Fed’s Daly says inflation temporary, taper may start by year-end

Carolyn Rogers appointed as Senior Deputy Governor of the Bank of Canada

German Inflation Rate at +2.3% y/y in June 2021

Bank of England Financial Stability Report: BoE warns some asset prices look stretched

Swiss Producer and Import Price Index rose by 0.3% in June

Upcoming Potential Catalysts on the Economic Calendar

API Crude Oil Inventory at 8:30 pm GMT
Japan Tankan Index at 11:00 pm GMT
Australia Consumer Confidence at 12:30 am GMT (July 14)
Reserve Bank of New Zealand Monetary Policy Statement at 2:00 am GMT (July 14)
Japan Industrial Production at 4:30 am GMT (July 14)
U.K. Inflation Rate at 6:00 am GMT (July 14)
Spain Inflation Rate at 7:00 am GMT (July 14)
Euro area at Industrial Production at 9:00 am GMT (July 14)

What to Watch: NZD/USD

NZD/USD 1-Hour Forex Chart
NZD/USD 1-Hour Forex Chart

Forex traders have got a pretty busy economic calendar ahead to pay attention to, but the big event to get ready for is the latest monetary policy statement from the Reserve Bank of New Zealand.

This is a highly anticipated event for Kiwi traders as analysts expect the RBNZ to potentially hint at tapering quantitative easing further and possibly hike rates in 2021.

With this expectation, the odds are pretty good that the Kiwi may rally during the upcoming Asia session if this scenario plays out as we don’t really see this expectation being priced in at the moment.

In recent weeks, broad risk sentiment has leaned somewhat negative on pandemic concerns, and the U.S. dollar has strengthened a bit on U.S. inflation concerns, so the Kiwi has had a tough time staying bid despite New Zealand’s relatively solid recovery from the pandemic (e.g, NZ business outlook bounces back in Q2 -NZIERRBNZ head Orr: New Zealand returning to pre-pandemic levels) and its rising inflation situation (e.g., New Zealand Food Prices Rise 2.8% On Year In JuneNew Zealand House Prices Continue to Soar Despite Curbs, etc.).

If this scenario plays out, we’ll watch NZD/USD for an upside break of the falling ‘highs’ pattern / major psychological level of 0.7000. A sustained break above that area increases the odds of a short-term bullish move in the pair, especially if global risk sentiment moves towards positive.

If we are surprised with bearish rhetoric from the RBNZ (i.e., pandemic concerns, no immediate plans to taper or hike interest rates), then there could be a very bearish reaction in the New Zealand dollar’s trend.

If risk sentiment remains somewhat negative, then in this scenario we’ll watch out for a break of the major support area (currently being tested around the 0.6920 handle) for a possible short-term short play on the pair.