NZD/USD has been trading in a downtrend for the past few weeks but it appears that the pair is ready to break out. Earlier today, the RBNZ had its monetary policy statement and decided to keep interest rates unchanged at 2.50%. However, RBNZ Governor Wheeler hinted that they could hike rates soon since inflationary pressures are very strong.
With that, NZD/USD might have enough energy for an upside break above the top of the channel. The .8300 area is already outside of the channel resistance, which suggests that it might be a good entry level. Setting a tight stop of 50 pips back inside the channel and below the .8300 handle should provide the trade enough leeway.
Aiming for the previous highs around the .8500 major psychological resistance seems to be a reasonable target, providing a potential 2-to-1 return on risk.
By Kate Curtis from Trader’s Way
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