Big time catalysts ahead for both the Kiwi and Greenback that could put NZD/USD in a place where sellers could take back control.
Resistance Ahead on NZD/USD?
From a fundamental perspective, it’s been mainly about monetary policy for currencies for a while now as the focus has been on “how much is everyone going to cut interest rates and when?” Traders have been speculating that both the Federal Reserve and the Reserve Bank of New Zealand will likely cut this year, and we’ll soon find out the answer as we’ll get the latest Fed statement tomorrow at 7:00 pm GMT, while the RBNZ will give us their latest statement on June 26th.
I think it’s a 50/50 shot on whether we see a rate cut tomorrow from the Fed given that it’s not yet all gloom and doom in the U.S. with some positive signs popping up here and there (e.g., like the latest positive read on U.S. retail sales). And with rhetoric on the U.S.-China trade negotiation story seeming to have improved today on news that President Trump and President Xi spoke recently & confirmed a meeting will take place at the G-20 next week, this puts less pressure on the Fed for a preemptive rate cut to combat any potential negative effects from an all out trade war. As far as the RBNZ goes, the RBNZ recently commented that rates would likely stay at current levels for the foreseeable future at the beginning of June, a situation that may play out for now given recent business survey data showing sentiment may be improving.
Of course, we’ll see what we get in the next week or so, but what I’m on the look out for is for the Fed to hold off on rate cuts & a rate cutting outlook. If this is the case and the Greenback sells off (buy-the-rumor, sell-the-news scenario) then I’m bullish on the Greenback over the rest of the major currencies at weaker levels. The potential catalysts for traders get back to bullish on the Greenback again after that event (that have decent probabilities of occurring) are the U.S. and China stepping closer to a trade deal, or more likely given the plethora of geopolitical risks out there, the Greenback would benefit off of safe haven flows.
I’ll look for NZD/USD to retest the previous strong areas of interest on the four hour chart above, basically the area between 0.6600 up to 0.6670. If retested and resistance forms, I’ll look to short NZD/USD for what could be a longer-term trade, especially if the RBNZ gives us a rate cut next week.
So stay tuned for a potential full idea after the FOMC meeting tomorrow, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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