What’s up forex friends! We’ve got top tier catalysts ahead from both New Zealand and the U.S. that makes this textbook technical setup on NZD/USD a must watch!
NZD/USD Pullback Ahead?
On the four hour chart above of NZD/USD, we can see the pair in a classic rising triangle pattern, where the lows are consistently rising over time while the resistance held like a champ around the 0.7250 minor psychological area.
But we just saw an upside break last Friday, creating an upside rising triangle breakout setup, where the typical play to make is to buy the break or wait for pullback to the broken resistance area and buy if support forms.
So, given the overall uptrend in the pair, that’s what we’re looking for to create a new potential long position, but we’re going to be patient as we do have potential top tier catalysts for both the New Zealand dollar and U.S. dollar ahead.
For the New Zealand dollar, we’ve got the latest monetary policy decision from the Reserve Bank of New Zealand to likely bring some action to the markets. Expectations are for the RBNZ to hold off on any policy changes, and for the RBNZ to be more optimistic (but cautious) on the economic outlook.
For the Greenback, we’ll be watching Fed Chair Jerome Powell’s testimonies before the Senate Banking Committee and the House Financial Services Committee this week for a potential reaction in the U.S. dollar. Expectations there are for the usual rhetoric of seeing a potential U.S. economic recovery ahead but still needing simulative policies. Inflation concerns are a recent development shaking up markets at the moment, so look out for comments on that as well.
If these scenarios play out as expected, we lean bullish on NZD/USD and if the market does retest the broken resistance and forms bullish reversal candles afterwards, that could be a signal that would draw in both swing and longer-term players to the long side.
Of course, if we get hints of a potential tightening (a very, very low probability scenario at this point), then look out for a potential shift in broad risk sentiment towards negative, as well as a potential reversal of broad bullish Kiwi sentiment and bearish USD sentiment.
What do you guys think? Will the upcoming central bank catalysts drive NZD/USD higher or lower form here?
Let me know in the comments below, 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.
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.