The NZD/USD pair continues to trade in the same range, but the Kiwi dollar is weaker in general, according to my expectations and calculations.
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NZD/USD Tests a Key Technical Area Ahead of Inflation Data
The New Zealand dollar has been all over the place during the trading session on Wednesday as traders are trying to get a read on where the Federal Reserve may go next. We already know that the New Zealand central bank is a little bit on the neutral side, and the Federal Reserve right now is still pretty active, in the sense that traders are betting on a 60% chance of a rate hike.
In other words, somebody out there is going to be very unhappy with the next decision on Wednesday. A couple of things that I am paying attention to right now are that PPI comes out on Thursday in the United States, as do the CPI numbers on Friday. Those are your last inflation reads before the next central bank decision on Wednesday.
Currently, from a technical analysis standpoint
If they come out hotter, I think that causes real problems for some currencies, like the New Zealand dollar against the U.S. dollar. Currently, from a technical analysis standpoint, we find ourselves right around the 200-day EMA and consolidating between the 0.59 and 0.58 levels.
This suggests to me that maybe the market is looking to try to find its way out of this range. I think the next couple of days could give us that opportunity. This will more likely than not be a U.S. dollar story, so I'll be watching the U.S. dollar all around the markets to see what it is doing.
With this, I like the idea of the U.S. dollar strengthening because I think we are setting up for a bit of a surprise, but you have to react to how the market breaks out of this 100-point range.
Potential signal:
I am selling here, with a stop at 0.59 and a target of 0.5680.
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