NZDUSD has sold off recently but appears to be approaching a rising trend line that’s just forming on its 1-hour time frame. A bounce off this support area could lead to a test of the previous highs at the .7400 major psychological level or the creation of new ones.
The 100 SMA just crossed above the longer-term 200 SMA to show that buyers are taking control of price action. Stochastic is indicating oversold conditions to suggest that sellers are starting to get exhausted, possibly giving way to bulls later on.
In addition, the moving averages are close to the rising trend line and 61.8% Fib, which could be the line in the sand for any pullback. This also coincides with a former resistance area, which might now hold as support.
The RBNZ just cut interest rates by 0.25% to 1.75% as expected. RBNZ Governor Wheeler highlighted both improvements and weaknesses in the global and domestic economy, concluding that a lower exchange rate is needed for growth to be sustained enough to bring inflation to the middle of its target range.
Meanwhile, the US dollar is still recovering from the post-election selloff and has been lifted by the pickup in US equities. For now, it looks like investors are giving new US president Trump the benefit of the doubt and are pricing in potential upside for companies on his sweeping tax reform plan.
Apart from that, it’s worth noting that both White House and Congress are under Republican control, which suggests smoother passage of laws without much gridlock. There’s not much in the way of top-tier data from the US for the rest of the week so the focus could stay on the government’s economic agenda.
By Kate Curtis from Trader’s Way