We recommended the NZDUSD’s rising trend channel as a range trade on Wednesday; and the strategy proved profitable today as we were entered and hit our first target before our second lot was stopped out at breakeven. Looking at the technicals after this trade, the setup for a range looks better today than it had two days ago. Our dominate technical formation remains the rising trend channel that found its start at the end of September.
Trading Tip – We recommended the NZDUSD’s rising trend channel as a range trade on Wednesday; and the strategy proved profitable today as we were entered and hit our first target before our second lot was stopped out at breakeven. Looking at the technicals after this trade, the setup for a range looks better today than it had two days ago. Our dominate technical formation remains the rising trend channel that found its start at the end of September. As for the risk of a breakout, scheduled economic event risk seems to pose little threat. The US calendar sees mostly second tier indicators, and the market has grown numb to home sales numbers. The RBNZ rate decision holds some level of inherent risk, but analysts and trader expect no change in rates any time soon. In fact, the majors may hold their major technical levels in anticipation of the Fed’s rate decision at the end of the month. To avoid excess risk, we will cancel any open orders by January 25th or should spot hit 0.7575 before we are entered on the trade.
Event Risk New Zealand and US
New Zealand – The clear highlight of New Zealand dollar event risk will be a Reserve Bank of New Zealand Official Cash Rate announcement on the 23rd, with markets unsure of what to expect from the central bank. Traders clearly believe that the OCR will remain unchanged at a record 8.25 percent, with 16 of 16 analysts polled by Bloomberg News forecasting such a result. Yet currency markets will pay very close attention to the attached statement from the RBNZ—especially as it relates to inflation and the future of domestic interest rates. An outlook for stable NZD yields will, all else remaining equal, leave the New Zealand dollar at a very clear advantage against its US namesake. Other event risk will include same-day Business PMI and Credit Card Spending reports and, rounding out the calendar, a Performance of Services Index release on the 27th.
US – Dollar event risk will be much more limited in the week ahead, but any particularly large surprises out of upcoming housing or Jobless claims figures may threaten to force noteworthy intraday price volatility in US dollar pairs. We nonetheless feel confident that the US dollar will range trade, as several consecutive days of sharp volatility will likely bring a slowdown in intraday price movements. Watch for any notable deterioration in domestic stock markets, however, as the NZDUSD would surely look to decline on continued stress in risky asset classes.
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Data for January 20 – January 27 |
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Data for January 20 – January 27 |
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Date |
New Zealand Economic Data |
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Date |
US Economic Data |
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Jan 23 |
RBNZ Official Cash Rate |
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Jan 22 |
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Jan 23 |
Business NZ PMI (DEC) |
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Jan 22 |
ABC Consumer Confidence (JAN 20) |
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Jan 23 |
Credit Card Spending (DEC) |
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Jan 24 |
Initial Jobless Claims (JAN 19) |
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Jan 27 |
Performance of Services Index (DEC) |
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Jan 24 |
Existing Home Sales (DEC) |
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Written By: John Kicklighter and David Rodriguez, Currency Analysts for DailyFX.com
To contact David or John about this article, email them at drodriguez@dailyfx.com or jkicklighter@dailyfx.com.