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The lack of data releases scheduled in early London session trading means that traders will take cues from overall risk sentiment for direction.

Will NZD/USD trade in a new direction today?

Before we talk setups, let me list down the top headlines that markets saw in the last couple of hours:

Major Forex Pairs Price Performance from MarketMilk
Major Forex Pairs Price Performance from MarketMilk

Upcoming Potential Catalysts on the Economic Calendar:

  • ECB Chairperson Lagarde to speak at Reuters event at 10:00 am GMT
  • Eurozone industrial production at 11:00 am GMT

What to Watch: NZD/USD

NZD/USD 1-hour Forex Chart
NZD/USD 1-hour Forex Chart

NZD/USD is trading inside what looks like a symmetrical triangle after breaking below a rising trend line support that had been solid since mid-December.

Will today’s headlines extend NZD/USD’s uptrend? Or will Kiwi bears find more momentum to drag the comdoll lower?

I’m not seeing top-tier releases during early London trading, so it’s likely that traders will take cues from risk sentiment for another day.

In case you just tuned in, know that markets are cheering the possibility of the Biden administration passing a stimulus bill worth trillions and that may include $2,000 in direct payments.

It also doesn’t hurt that the U.S. Senate won’t pick up Trump’s impeachment articles until the last full day of his administration (January 19), which means that we won’t worry (much) about leadership instability until then.

If the risk rally continues across the board, then we could see NZD/USD trade above the 100 and 200 SMAs to break above its triangle. Watch out for a trip above the broken trend line support, which could eventually boost NZD/USD to its January highs.

Meanwhile, the bears can watch out for a break below the triangle support. If NZD/USD makes new January lows, then the comdoll can make its way to the .7100 or .7050 previous support levels.