NZDUSD Channel Break Correction (Sep 27, 2016)

NZDUSD was previously trading inside an ascending channel formation before making a downside break and hitting a low of .7220. From there, price showed signs of a pullback and looks ready to make a retest of the broken channel support at the .7300 major psychological level.

 

Applying the Fib tool on the latest swing high and low shows that the 61.8% retracement level also coincides with the broken channel support, adding to its strength as potential resistance. If it holds as a ceiling, NZDUSD could resume its drop to the previous lows or much lower. 

 

The 100 SMA just crossed below the longer-term 200 SMA to confirm that the path of least resistance is to the downside. In addition, the moving averages appear to be holding as dynamic inflection points at the moment. Stochastic is already on the move down from the overbought zone to show that sellers are taking control of price action.

 

Last week, the RBNZ hinted that they’re keeping the door open for additional rate cuts, citing concerns about inflation and weak demand from emerging economies. Governor Wheeler also emphasized that the Kiwi is trading at high levels, which is dampening export activity and overall growth.

 

Meanwhile, the FOMC also decided to keep rates on hold for the time being but hinted that they could still tighten in their next policy meetings. Three members voted to hike in September, reflecting a shift to a more hawkish committee. For now, policymakers have indicated that they’ll be keeping close tabs on upcoming data to see if they can stay on track towards hiking rates soon.

There’s not much in the way of top-tier reports from both economies this week, though, so these monetary policy biases could be the main driver of price action. Apart from that, overall market sentiment could also be influenced by the US presidential debates and the OPEC meetings, with risk-off moves favoring the safe-haven USD.

 

By Kate Curtis from Trader’s Way