FOMC & RBNZ Statements Coming Up. Pair to Watch: NZD/USD

FOMC & RBNZ Statements Coming Up. Pair to Watch: NZD/USD

– Update-

Fed revisions to their statement:

1- All calendar references have been removed when it comes to when the fed might begin raising interest rates.

2- No changes to its zero interest rate policy

3- The Committee anticipates it will be appropriate to raise the target range of the Fed’s funds raise when we see further improvement in labor market, when the Fed is reasonably confident that the inflation will move back to the 2% objective

4- Economy slowed during winter as June liftoff odds drop

As you may have already figured out, our forex pairs on the forex dance floor finally got it moving this week and are showing signs of breaking their ranging dance pattern.

But the most important move of the week is yet to come. Let’s focus on the two important ones for today which could change the path of the Kiwi – Dollar pair:

FOMC Rate Statement (Wednesday, 7:00 pm GMT)

The Federal Reserve might make any minor changes to their policy wording today. Here are the big questions:

  1. Will Fed head Janet Yellen acknowledge that Q1 data could change the Fed’s path?
  2. Is weaker growth and slowing job creation is set to stay?
  3.  Will the Fed Chair sees Q1 as an aberration?

A few Fed officials have noted that the latest slowdown in hiring, spending, and business production is nothing but a temporary bump while more cautious policymakers have suggested that they delay tightening until next year.

We have seen Ms. USA gradually retreating from its stellar up-moves that had been going on since last year. If Yellen confirms that the committee is rethinking its rate hike schedule, the US Dollar could lose further ground against its forex counterparts on the forex dance floor.

On the other hand, reassuring comments from Yellen could remind traders that the U.S. economy is still one of the better performing economies out there and allow the dollar to recover.

RBNZ Rate Decision (Wednesday, 10:00 pm GMT)

Kiwi pairs have been pushing higher in the past few days but official rate statement of Reserve Bank of New Zealand today might push the pairs around again.

RBNZ’s second-in-command mentioned that a rate hike is off the table for now and that they might even consider cutting interest rates if the inflation outlook stays subdued.

Many traders remain bearish on Kiwi pairs since recent economic reports from New Zealand have been mostly disappointing, as their quarterly CPI fell short of expectations while business and consumer sentiment have been disappointing. It doesn’t help that the Global Dairy Trade index has logged in price declines for three consecutive instances, indicating a slump in the dairy industry. The country’s major trade partners, Australia and China, have also been encountering road bumps these days and could probably reduce their shipments from New Zealand.

With that, the RBNZ could reiterate their downbeat assessment and outlook this week and spark another wave of losses for Mr. Kiwi. As always, RBNZ Governor Graeme Wheeler might also take this opportunity to jawbone their currency again and emphasize that a weaker Kiwi would be more beneficial for price levels and trade activity.

NZD/USD Technical Outlook

NZD/USD Daily: Reached our First Bullish Target

Trading Idea: Caution during risk events. If you already are in a trading position, keep a close eye on your chart during the above risk events.

Technical Analysis: The pair broke above our pivot levels after forming a spinning top and is trading above the Ichimoku cloud, within an upward channel. However it seems to have difficulty breaking above 0.77. If the pair successfully break above this barrier, we could see more up-moves towards the next key resistance and 38% Fibonacci at 0.7831.

Alternative Scenario: Below pivot level at 0.76 look for further drops targeting 0.7460

Suggested stops and limits:

Support Levels Turning Point Resistance Levels
0.7460 0.7600 0.77700
0.7350 0.7675 0.7831