Partner Center Find a Broker

No changes are expected from the Reserve Bank of New Zealand later, but they have been known to surprise traders and spark some action in NZD.  That makes this consolidation / bearish pattern one to watch on NZD/USD.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/USD as it tests a strong support area, so be sure to check that out to see if there is still a potential play!

Equity Markets Bond Yields Commodities & Crypto
DAX: 12684.58 +1.13%
FTSE: 5795.32 -3.52%
S&P 500: 3236.45 -2.50%
DJIA: 26833.23 -2.98%
US 10-YR: 0.669% -0.002
Bund 10-YR: -0.506% +0.022
UK 10-YR: 0.196% +0.038
JPN 10-YR: 0.006% -0.004
Oil: 39.59 +0.71%
Gold: 1920.90 +0.53%
Bitcoin: 10485.79 +0.32%
Ethereum: 342.15 -0.13%

Fresh Market Headlines & Economic Data:

Boris Johnson says UK is at a ‘perilous turning point’ and tells people to work from home

BOE Governor Bailey talks down the idea of moving rates to negative

U.S. Existing-Home Sales Hit Highest Level Since December 2006

Richmond Fed Manufacturing Index inches higher to 21 in September vs. 18 in August

Philly Fed non-manufacturing index rose from 17.9 in August to 20.4 in September

S&P 500 rises for the first time in five days, Amazon up 1%

EU-UK Brexit talks challenging, Simon Coveney claims

Flash consumer confidence for September, +0.8 in the euro area; +0.6 in the EU (0.6 points up) compared to August.

ECB should err in doing too much rather than too little: Panetta

UK Manufacturer output volumes in the three months to Sept. fell at a slower pace than in Aug. – CBI Survey

Oil rises on expectations demand can survive new lockdowns

Upcoming Potential Catalysts on the Economic Calendar

API Crude oil inventory at 8:30 pm GMT
Reserve Bank of New Zealand Interest Rate statement at 10:00 pm GMT
Australia CommBank Manufacturing & Services PMI at 11:00 pm GMT
Japan Jibun Bank Manufacturing & Services PMI at 12:30 am GMT (Sept. 23)
Japan All Industry Activity Index at 4:30 am GMT (Sept. 23)

What to Watch: NZD/USD

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

On the one-hour chart above of NZD/USD, we can see the currency pair recently broke a rising ‘lows’ chart pattern formed over the past couple of weeks and today we can see the pair now breaking below a strong support area around the 0.6650 minor psychological level. Will this break hold or will the bulls jump in to take control?

Well, it will all likely depend on what we see from the latest monetary policy statement from the Reserve Bank of New Zealand in the upcoming Asia trading session. Expectations are for no changes to policy this month, so trading will be looking for forward guidance on potential negative interest rates or increased bond purchases.

So for the bulls on NZD/USD, a combination of positive global risk sentiment and the RBNZ toning down the idea of negative interest rates / increased bond purchases will likely draw in buyers to the pair, making the current support area around 0.6650 down to the major swing low at 0.6600 one to watch for bullish reversal candles.

If that scenario plays out, short-term and swing setups are great setups with favorable potential return-on-risk profiles if using the daily ATR of around 65 pips.

For the bears on NZD/USD, the market is currently in your favor, and if broad sentiment stays negative and the RBNZ hits us with dovish rhetoric (commentary on recent disappointing GDP, business and consumer sentiment data, more open to negative rates/increase bond purchasing), then shorting at current levels up to the broken trend line makes sense as an entry strategy.

This could be the start of a broader move lower in the Kiwi in this scenario, so don’t rule out longer-term setups if that’s one of your trading time frames.