NZDUSD is trading steadily ahead of the RBNZ statement, despite initially gapping lower in today’s trading. The currency pair opened at 0.6379 after finishing last week’s trading at 0.6404. However, NZDUSD has drawn enough bids to cover the weekend gap. As of this writing, the currency pair is trading at 0.6416.
It has been a relatively quiet morning for the currency pair. Only the credit card spending report for May was released which came in at -21.1, better than the -49.4% reading for April.
The calendar for the New Zealand dollar will be quiet leading up to the RBNZ rate statement on Wednesday. Scheduled at 3:00 am GMT, market participants are widely expecting the central bank to keep rates steady at 0.25%. The QE program is also seen to remain at a cap of 60 billion NZD.
According to analysts, the recent improvement in economic conditions in New Zealand should be enough to keep central bankers on the sidelines. However, the RBNZ will likely warn about more challenges that lay ahead of the country’s recovery.
In particular, market participants will be keeping an ear out for remarks about negative rates. A few weeks ago, there were speculations that the RBNZ may still reduce rates to negative territory. If the statement on Wednesday reveals that the central bank is still considering this as an option, we could see further weakness on NZDUSD. On the other hand, rhetoric that veers away from this option could push NZDUSD higher.
On the daily time frame, it can be seen that NZDUSD retraced some of its gains back to the 23.6% Fib level (when you draw the Fibonacci retracement tool from the low of May 18 to the high of June 10).
A closer look at the recent price action of the currency pair shows that it has been consolidating in a downward slope. Because this follows after a strong rally, a bullish pennant chart pattern has formed. When you enroll in our free forex trading course, you will learn that this is a bullish continuation indicator. A strong close above NZDUSD June 16 highs at 0.6505 could mean that buyers are dominating trading. Should this happen, we could soon see the currency pair retest its June 10 highs at 0.6583.
On the other hand, a close below today’s lows at 0.6379 could mean that NZDUSD would soon fall to the confluence of support around 0.6253. This price coincides with the 50% Fib level and rising trendline (from connecting the lows of March 19 and May 18) which could provide the currency pair with support.