U.S. inflation data just shook up the Greenback, and with the latest monetary policy coming soon from the Reserve Bank of New Zealand, the Kiwi may be making moves very soon.
Is NZD/USD setting up for a longer-term breakout soon? Are there shorter-term support and resistance plays until then?
Shorter & Longer-term Setups on NZD/USD
NZD/USD should be an interesting pair to watch for both short-term and longer-term forex traders in August. Volatility for the pair may pick up very soon now that we’ve gotten a fresh update for U.S. consumer inflation conditions (July consumer prices jump 5.4%, but core inflation rises less than expected), a bit of a disappointment for USD bulls as this may taper Fed Taper expectations in the short-term. We’ve got more economic updates from the U.S. coming this week to likely keep the Greenback moving for the rest of the week.
For the New Zealand dollar, traders are likely ready to start making moves as we get inflation data from New Zealand in the upcoming Asia session, and the big event of the month, the latest monetary policy statement from the Reserve Bank of New Zealand next week.
There’s lots of speculation floating around that the RBNZ will end bond purchases or hike interest rates, and if they do, they’ll be the first major central bank to end pandemic era policies. Whatever happens next week, the Kiwi is surely set to move.
For the short-term, we can watch the consolidation pattern above for potential reversal plays at the trendlines. With RBNZ next week, the odds are low at the moment for a big breakout move, barring an exogenous event that pushes broad market sentiment one way or another.
Right now the pair is testing the falling ‘highs’ pattern, and if we see hotter-than-expected U.S. PPI or preliminary consumer sentiment data this week, NZD/USD bears may take back control short-term. And for the bulls, a retest of the 0.7000 is likely to draw in bulls, especially with today’s somewhat positive data for USD bears.
For longer-term players, that consolidation pattern above should be watched for a breakout setup, and with the odds of the RBNZ tightening policy vs. reduced odds of a Fed taper with today’s CPI numbers, an upside break is a more likely move than a downside one.
Of course, if the RBNZ does not reduce or end bond purchases and/or hike interest rates, then that could draw in a bearish reaction for the Kiwi, making a downside break a potentially legitimate signal for a downside momentum move.
What do you guys think? Will traders keep the consolidation pattern on NZD/USD in tact this week? Will we see a consolidation break next week?
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.
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