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NZDUSD - Sell The Rumour, Buy The Fact?

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by , 06-10-2014 at 11:44 AM (1425 Views)
NZDUSD - Sell The Rumour, Buy The Fact?

  • I expect sideways trading until the rate decision and for 25bps will be added to bring rates to 3.25%
  • This should see NZDUSD break up through 0.852 and target 0.864 and eventually 0.87 highs
  • Fundamentally still strong, I do not expect 'jaw-boning' from RBNZ and for NZDUSD to become bullish after Thursday
  • Talk of intervention to bring down NZD would have more bearish impact upon NZD than not raising rates
  • 0.840 is a pivotal swing low and for NZDUSD to return to the bullish trend

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Despite the fact RBNZ are paying the highest interest rates among G10 currencies traders have continued to short NZD when RBNZ hinted the rate hikes may not be aggressive as previously thought. They also talked of potential intervention by shorting NZD if the overpriced Kiwi Dollar remains among poor fundamental data. Price has been within a steady downtrend for the past month until price reached 0.840.
0.840 is a key level of support which was successfully defended following last Thursday's' ECB meeting, and the Greenback sell-off. NZDUSD posted its single largest day gain since March '14, respecting the 200-day eMA and closing the week with a Spinning Top Doji to warn of a weakness the sell-off from the May Highs.
Friday and Monday produced 2 failed attempts to break above 0.8517 resistance, however price continues to hover around the 0.850 handle and I expect this sideways trading to continue leading up to the release.

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If we do break above 0.8520 then we have resistance close by around 0.857 which I expect to hold upon first attempt, so ideally we will see basing patterns above 0.850 and for buying pressure to increase whilst the trend is established.


A break below this week's range should target 0.843 and 0.840, with a break below 0.840 being quite bearish for the Kiwi and for losses to gain momentum. For this scenario we would have to keep rates fixed at 3% and for NZD to strengthen talk of intervention.

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