NZDUSD has been moving sideways for quite some time and is currently testing the top of its range on the 1-hour time frame. Price is finding resistance around the .6600-.6650 levels and might head back to support at the .6500 major psychological mark.
However, stochastic is moving up from the oversold area, suggesting that further gains are possible. RSI is on the move down though, which means that there’s selling pressure present.
On the other hand, the moving averages are hinting at further gains since the 100 SMA crossed up from the 200 SMA. A break past the range resistance could lead to a rally of at least 150 pips or the same size as the rectangle pattern.
Economic data from New Zealand this week wasn’t as bad as expected, as the dairy auction even recorded an increase in prices. This was probably spurred in part by Russia’s removal of its ban on milk imports from the country. Apart from that, the PPI readings weren’t so far below expectations.
As for the US, the CPI readings were weaker than expected while the FOMC minutes showed hesitation regarding a Fed rate hike. As it turns out, Fed officials are seeing improvements in the labor market but are not so sure about inflationary trends. Some pointed out that commodity prices could fall again and that the impact of the dollar’s depreciation is fading.
Only the flash manufacturing PMI is due today and it is expected to tick up from 53.8 to 53.9. Weaker than expected data could mean more losses for the US dollar, as it might suggest that tightening would take place much later this year or possibly early next year. On the other hand, a stronger than expected figure could result to a dollar rally before the end of the trading week.
By Kate Curtis from Trader’s Way