Economists widely expect the Reserve Bank of New Zealand (RBNZ) to hike its overnight cash rate by 25 bps for a third consecutive time on Wednesday. Whether or not the central bank’s decision holds any surprises doesn’t detract from what ultimately could prove a positive technical setup for NZD/USD further down the line.
NZD/USD hit a high of 0.74607 in February of last year but failed to establish a fresh higher. Instead, the currency pair has been trapped in a range between 0.74607 and the previous swing low of 0.65095. Within that range, NZD/USD has formed a downward trend channel, which led price to test but fail a break close to the bottom of its this long-held range.
Both the failed test of the bottom of the range and the downward channel could portend a continuation of last year’s uptrend. Still, considering recent geopolitical tensions related to the Ukraine and NZD/USD’s sensitivity to “risk-on” and “risk-off” sentiment, NZD/USD trades are not for the faint of heart.
That said, for those looking for upside, there is a lot of cohesions in terms of chart. A definitive break above the 0.67052 region leaves 0.68907 the next major point of resistance, which coincides near both 200EMA and the upper band of the upward trend channel. From there .71000 pivot region could be in the grabbing. Meanwhile, downside, at least for the moment looks strongly contained near the 0.65095 region.
