Nick Nasad
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NZD/USD - Watching the Range Action For A Break

The NZD/USD has been in a range over the last 2 weeks, which can be sub-divided into an even tighter 50-pip range over the last 4 sessions.

While ranging conditions can be a bit difficult to trade, the longer a range goes, the more "potential" or built up energy is being stored before there is a move in one direction or the other.

That is my theory here, and we should monitor the support (around 0.8220) and resistance (0.8345) levels of the current range for any break-out action. Coming into the FOMC decision, the USD was on the backfoot, and in the wake of that decision markets have been on guard as a result of the US government shutdown and debt ceiling issues.

Therefore, where the pair breaks out may hinge on the outcome of that risk catalyst. If, after further brinksmanship, the debt ceiling is passed and the government shutdown ends, the markets are likely to have some form of relief rally, which should benefit a risk-sensitive currency like the NZD and argue for a further move higher.

However, if US politicians push the limits and allow the the debt ceiling to lapse, it could mean a big flight towards safety and perhaps a move into the USD (similar to 2011). In any case, we can let the charts do the talking for the fundamentals and simply monitor which way the pair breaks out of its recent ranging conditions for clues as to the next swing.

- Nick