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It’s FOMC day, fellas!

Will they pivot and how might the dollar react?

Here’s a setup I’m watching on NZD/USD.

Before moving on, ICYMI, yesterday’s watchlist checked out USD/JPY’s ascending triangle pattern ahead of the U.S. CPI release. Be sure to check out if it’s still a valid play!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

U.S. headline CPI slowed from 7.7% to 7.1% y/y in Nov

Japanese Oct core machinery orders recovered by 5.4% m/m after previous 4.6% slump

Japanese Tankan manufacturing index down from 8 to 7 in Nov vs. consensus at 6

Japanese Tankan non-manufacturing index up from 14 to 19 in Nov

RBNZ official Hawkesby: Need to do more to fight off inflation

U.K. headline CPI slowed from 11.1% to 10.7% y/y in Nov

U.K. core CPI fell from 6.5% to 6.3% y/y in Nov

Swiss producer prices dropped by 0.5% m/m in Nov after staying flat

Upcoming Potential Catalysts on the Forex Economic Calendar:

FOMC statement and economic projections at 7:00 pm GMT
FOMC press conference at 7:30 pm GMT
New Zealand GDP q/q at 9:45 pm GMT
Australian employment report at 12:30 pm GMT (Dec. 15)
Chinese fixed asset investment, retail sales & industrial production at 2:00 am GMT (Dec. 15)

Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️

What to Watch: NZD/USD

NZD/USD 1-hour Forex Chart

NZD/USD 1-hour Forex Chart

Is the dollar in for more losses after the FOMC?

Market players are expecting the Fed to pivot to a less hawkish stance, slowing down their pace of interest rate hikes to just 0.50% this time.

This scenario has been priced in for quite a while, though, so the gamechangers might be the updated economic projections and the presser.

In particular, upgrades to growth and employment forecasts might be enough to get dollar bulls charging again in hopes that tightening could carry on until 2023.

Also, recall that Fed head Powell’s latest speech was still mostly optimistic, as he cited that they will “stay the course” until inflation is much lower.

In any case, I’m keeping my eyes peeled for a test of the rising trend line support on the hourly chart of NZD/USD.

The pair is closing in on the area of interest at the 61.8% Fib, .6400 handle, and 100 SMA dynamic support that might be enough to keep losses in check.

Technical indicators are hinting at a continuation of the climb, as the 100 SMA is above the 200 SMA while Stochastic is dipping into the oversold region.

If support holds, I’d try to catch a move back up to the swing high and beyond. On the other hand, a break lower could be a chance to hop in on a reversal from the uptrend.

Don’t forget to look out for New Zealand’s GDP release, too!