Check out this textbook break-and-retest setup lining up on NZD/USD!
Will this confluence of support zones keep holding?
Here are the levels I’m watching on the 4-hour time frame.
NZD/USD 4-hour Forex Chart by TradingView
This week is shaping up to be an exciting one for Kiwi traders since the RBNZ interest rate decision is coming up!
Even though no actual policy changes are expected for now, hawkish bets remain in play since inflation and employment have been runnin’ hot in New Zealand. And if policymakers do maintain their upbeat view, it would set the RBNZ apart from other central banks mostly shifting to a dovish stance.
Meanwhile, dollar traders also have a lot to look forward to, as the preliminary GDP reading for Q4 2023 is lined up, followed by the U.S. core PCE price index or the Fed’s preferred inflation measure.
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the Kiwi and the U.S. dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
Now no major surprises are expected from U.S. data, but it seems that market players are getting tired of reports simply supporting the Fed’s rate cut pushback. That’s nothing new!
With that, even the slightest miss in these U.S. figures might boost the likelihood of Fed easing as early as May, possibly forcing the dollar to a good amount of gains.
In that case, NZD/USD might be able to find buyers at the area of interest around the 50% to 61.8% Fib levels that align with S1 (.6140), the moving averages, a former descending trend line, a broken resistance zone just below the .6150 minor psychological mark.
The 100 SMA is below the 200 SMA for now, but the gap between the moving averages has narrowed significantly enough to hint at a likely bullish crossover.
At the same time, Stochastic is hanging out in the oversold region to reflect exhaustion among sellers, so turning higher might mean that buyers are ready to jump back in.
If the area of interest is enough to keep losses in check, watch out for an NZD/USD rally back up to the swing high at .6220 or even until the upside targets at R1 (.6240) then R2 (.6270).
Do you think support is likely to hold after the RBNZ announcement?