NZDUSD has recently broken past a key resistance level at the .6600 major psychological mark then zoomed up close to the .6800 handle before showing signs of a pullback. Using the Fib tool on the latest swing high and low shows that the 61.8% retracement level lines up with the area of interest.
Stochastic and RSI are both on the move down, indicating that sellers are in control for the time being. However, both oscillators are already nearing the oversold region and a turn higher could indicate a return in bullish momentum.
In addition, the selloff appears to be slowing with a few spinning tops being formed. If the .6600 area holds as support, a bounce back to .6800 might take place.
The main event risk for this trade is the RBNZ interest rate decision, during which some analysts are expecting to see another 0.25% rate cut. After all, RBNZ head Wheeler mentioned that some further reduction in the OCR seems likely in their previous rate statement.
Still, the New Zealand economy has actually posted some improvements in the past few weeks, leading some to believe that further easing is no longer necessary. Dairy prices have posted a rebound while consumer spending has been much stronger than expected in Q3.
Other event risks include the release of US retail sales data, with stronger than expected results likely to fuel rate hike speculations. This has been positive for risk sentiment recently, so it might also add to the Kiwi's gains.
By Kate Curtis from Trader's Way