Market News & Analysis
Currency Pair of the Week: NZD/USD
Joe Perry May 12, 2020 12:12 AM
The Reserve Bank of New Zealand (RBNZ) is set to meet on Wednesday to discuss interest rate policy. Although no change is expected, the focus will be whether or not they increase the size of their QE, and my how much. At the last meeting in March, there was talk they could double the size of QE to NZD 60 billion at this meeting. In addition, market participants will be watching the press conference to see if there is talk about the possibility to moving to negative interest rates. If the RBNZ continues with a dovish tone, the New Zealand Dollar could move lower.
On Tuesday, the US releases Inflation data. The headline inflation rate is expected to fall from -0.4% to -0.7%. The Core inflation rate is expected to fall to -0.2% from -0.1%. There has been speculation among economists and traders lately that the Fed may go to negative interest rates, something they don’t want to do. On Tuesday there are no less then 5 Fed members speaking throughout the day. In addition, Fed Chairman Powell is set to speak on Wednesday to the Peterson Institute for International Economics regarding the current US economy. It will be important to watch for any comments regarding negative rates.
The daily timeframe chart for NZD/USD is showing that price is currently in an ascending wedge formation. Traders will look for a break lower to confirm the wedge. The target for an ascending wedge is a full 100% retracement, which would put price below .5700. In addition to the ascending wedge, the pair opened the week just below horizontal resistance at .6193 and has been hovering near the 50% retracement level form the highs of December 31st, 2019 to the lows of March 19th, near .6110. Although there is still lots of time left in the day, NZD/USD is in the process of forming a bearish engulfing candle, which would point lower for the pair.
Source: Tradingview, City Index
Resistance above at the previously mentioned horizontal resistance level of .6193. Next level is the 61.8% Fibonacci retracement level and the upper trendline of the ascending wedge near.6260. Above there, price can run up to the March 9th highs near .6450. First support is at the bottom trendline of the ascending wedge near .6050. Below there, NZD/USD can fall all the way down to horizontal support near .5740. Final support is March 19th low at .5470.
NZD/USD traders will have all eyes on their respective central banks this week. The more dovish central bank will win the battle for a depreciation of their currency. However, the technical picture is showing a corrective formation, which indicates that the pair may be ready for a move lower!
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.