With little expectations of a major catalyst ahead, this ranging pattern on NZD/USD is one to watch ahead of business sentiment data from New Zealand.
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/CAD ahead of the ECB monetary policy statement, so be sure to check that out to see if there is still a potential play!
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Fresh Market Headlines & Economic Data:
Upcoming Potential Catalysts on the Economic Calendar for U.S. & Asia:
Fed Evans speech at 5:30 pm GMT
U.S. Net Long-Term Tic Flows at 8:00 pm GMT
New Zealand Business Manufacturing Index at 10:30 pm GMT
U.K. Gfk Consumer Confidence Flash at 11:01 pm GMT
What to Watch: NZD/USD
We’ve got a pretty light forex calendar in terms of potential catalysts for strong moves, so the odds of a breakout or momentum play are pretty low for the next session. Instead, we’re checking out range plays, NZD/USD in particular as volatility may pick up a bit with upcoming mid-to-low tier economic data from both the U.S. and New Zealand.
On the one hour chart above, we can see that NZD/USD has been in a range for the month of July, trading between 0.6500 – 0.6600, mainly moved by global risk sentiment and coronavirus news. Again, unless we see some surprise headlines to shift global risk sentiment strongly one way or another, the top and bottom of this range is likely where we’ll see technical traders jump in on reversal setups.
For bulls, a retest of the support area (between 0.6500 – 0.6530) and bullish reversal patterns is something to watch, especially if broad global risk sentiment shifts back to positive ahead of the weekend. With a daily ATR of around 110 pips, the top of the range is a viable swing target if volatility remains low, or as a day target if we see a spike in volatility.
For the bears, a retest of the top of the range and bearish reversal patterns around 0.6600 may draw in technical sellers, especially if risk sentiment stays negative heading into the weekend. Given the lower ‘highs’ pattern already forming, a scaling entry technique should be considered, starting from around 0.6580 up to 0.6600. Again, without a pop in volatility, hitting the bottom of the range would likely take more than a few sessions, so take that into consideration before putting risk on before the weekend.