NZD/CHF looks like an interesting candidate for a longer-term play as New Zealand gave strong growth numbers and as the pair retests a broken resistance area.
Long-term Support Forming on NZD/CHF?
Since peaking just under the 0.6800 major psychological level back in February, the Kiwi has been in slow grind lower against the Swiss franc. That has brought NZD/CHF to a strong area of interest around the 0.6400 handle, that held as resistance at the end of 2020 before the pair broke higher in 2021. Will this broken resistance are now serve as support?
Well, we just got a really strong GDP read from New Zealand for the first quarter of 2021 (+1.6% vs. 0.5% expected), strong enough for analysts to speculate that we’ll see a rate hike from the Reserve Bank of New Zealand in early 2022. If data continues to post this strongly throughout the rest of 2021, the Kiwi may have the legs to run higher as long as broad risk sentiment remains relatively positive.
As for the Swiss franc, we just heard from the Swiss National Bank, saying that monetary policy will remain expansionary despite higher inflation expectations. This could keep a lid on the franc’s value, at least as long as broad risk sentiment remains relatively positive.
Broad risk sentiment is the “x factor” with this pair and most of the financial market, which became a little more uncertain after the Federal Reserve moved forward expectations of monetary policy tightening yesterday. If this doesn’t faze investors too much away from risk assets over the next couple of quarters, then the odds are pretty good that NZD/CHF bulls will hold the line at the broke support area for now.
So, we’re going to be on the look out for buying support to form around 0.6400 – 0.6500, and if the market starts to get bullish, that could draw in more buyers quickly as long as current themes persist (i.e., global risk-on sentiment as pandemic recovery continues). And if the market does move higher and the falling ‘highs’ pattern is broken, that could draw in more buyers to start the next longer-term leg higher in the pair.
What do you all think? Is this a good buying opportunity on NZD/CHF for a longer-term play? Let me know in the comments section below!
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