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NZD/USD at Key Support with FOMC and RBNZ Risks Ahead

The NZD/USD started another leg to its downtrend in the last week when it fell from 0.7870 and broke below 0.7608 as we can see in the daily chart.

(NZD/USD Daily Chart)

The breakout maintains a bearish trend in the NZD/USD and there is no sign of slowing yet. Even though the daily RSI is near oversold, we know that it can remain oversold for quite some time if the prevailing trend is bearish. 

But when we look at the weekly chart, we can see that at 0.7370, there is a key support pivot from 2011.

(NZD/USD Weekly Chart)

The NZD/USD hovering above this key support with the FOMC and RBNZ even risks ahead.

The FOMC announcement will be highly anticipated because the market will be curious to how it responds to the recent downturn in data as well as the moves by other ECBs. If the FOMC's language projects caution, and a possible delay in the rate hike, we can see a slide in the USD and the NZD/USD will have upside risk first to 0.76, but limited to the 0.80 handle for now. A steadfast FOMC should be a drag on the NZD/USD and the 0.7370 support will likely be tested. A break below 0.7370 opens up the 0.70 handle, with the 0.71, 2011 low also being a possible support.

The RNBZ could sneak in here with a surprise rate cut and that might send the NZD/USD down below 0.7370. If the NZD/USD was rallying ahead of the RBNZ announcement, a rate cut would likely prevent it from breaking above 0.76, and put pressure back on the 0.7370 low. Otherwise, if it is just another hold and see type of decision, its moves will likely be guided by the USD.