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Big moves may lie ahead this week for the New Zealand dollar with the latest monetary policy decision from the Reserve Bank of New Zealand just a couple of days away.

Will this prompt NZD/USD to break out of recent consolidation and back into its uptrend?

NZD/USD Uptrend Pullback?

NZD/USD 4-Hour Forex Chart
NZD/USD 4-Hour Forex Chart

NZD/USD bulls were on a tear higher from mid-May into June, but the markets have calmed down a bit as the “reopening trade” has lost some legs recently. No only that, coronavirus fears have risen lately with cases rising in the U.S. and Beijing locking down after an outbreak last week. Over the past week or so, NZD/USD fell into a sideways pattern, trading between 0.6400 – 0.6500.

But as mentioned above, directional bias could come back to NZD/USD with the latest monetary policy decision from the Reserve Bank of New Zealand coming June 24 at 2:00 am GMT. Expectations are for no changes to policy, but it’s likely the RBNZ will keep its dovish view on fears of a second coronavirus wave. The RBNZ has been known to surprise traders in the past, so the odds are good that the Kiwi will get moving on the event, but right now, it’s tough to pick a likely direction until after the event.

So with that, I’m going into watch mode on NZD/USD, but if we don’t see an extremely dovish statement, I think the odds are pretty good of NZD/USD returning to its uptrend.  Economic numbers continue to improve on net around the world, and despite the coronavirus numbers having turned sour recently, it doesn’t seem to be affecting trader’s risk appetite too much. If these themes hold after the event, I’ll look to start a long position in the currency pair.

From a price action standpoint, a long position looks especially attractive on a pullback, a given the strong run we had in May into June, a pullback may due pretty soon. Stochastic is showing overbought conditions and there may be profit taking ahead of the RBNZ event.

I also marked the chart with Fibonacci retracement tool and we could see the Fib support area starts around 1.6330 and gets down to 1.6160, so if the pair does pullback, I’ll be watching that area for bullish support patterns before putting together a long position.

Stay tuned for that 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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