Currency Pair of the Week: NZD/USD

With the vaccine news today, as well as the breakout from the channel, NZD/USD could continue to push higher.


The Reserve Bank of New Zealand (RBNZ) meets on Wednesday to discuss interest rate policy and is expected to leave its official cash rate (OCR) unchanged at 0.25%.   At the September meeting, policy makers discussed the possibility of using negative interest rates to help achieve its employment and inflation goals. However economic data has been strong (relative to many other countries). Last week’s Q3 Unemployment Rate release came in 5.3%, which  gives the RBNZ plenty of wiggle room before the they need to go that route. In addition, the central bank is expected to release details of a funding-for lending program (FLP), which will provide cheap loans for bank to help stimulate the economy.  Watch the press conference for clues from Governor Adrian Orr.

Election results are in (finally), and Joe Biden will be the 46th President of the United States.  But don’t expect current president Donald Trump to go down without a fight! Some of the states were extremely close, giving the sitting President the right to call for a recount in those states.  In addition, the Trump camp has already begun legal action in some states.   Most of these cases have been denied.  Expect Trump’s actions to be a “side show” to the markets, as they continue to factor in a Biden victory. 

Whereas New Zealand has the coronavirus relatively contained,  it is beginning to run rampant again the United States.  Record numbers of daily cases continue to climb.  On election day, the US surpassed 100,000 daily cases for the first time and on this past Saturday, it reached 128,000!  However, Pfizer announced this morning that according to studies, its coronavirus vaccine prevents 90% of covid cases.  They will seek a US review later this month.  This news is continuing to weigh on the US Dollar as risk-on moves continue!

NZD/USD has been trading in a sideways channel since early July.  The pair appeared to be forming a Head and Shoulders pattern, however that pattern has been invalidated today, as the US Dollar has been getting clobbered over the last week with the expectation of a Joe Biden Presidency.  Once the Head and Shoulders was invalidated, the pattern can now be considered a triple bottom.  The target for the triple bottom is the distance of the height of pattern, added to the breakout point.  Today’s breakout indicates a target of near .7060.  However, price must fist get through horizontal resistance at .6970 (from December 2018, as well as the psychological round number level of .7000.  Frist support is the breakout point near .6810, then the previous right shoulder (horizontal support) near .6720.  3rd support level is  the bottom of the channel near .6510.

Source: Tradingview, City Index

With the risk-on vaccine news today, as well as the breakout from the channel, NZD/USD could continue to push higher.  However, if the RBNZ is more dovish than expected, there is a chance the New Zealand Dollar could pull back. 

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