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|
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Fresh Market Headlines & Economic Data:
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
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.
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.