The recent NZDUSD rally has been impenetrable. Just when it looked as though the pair was struggling per last Thursday’s bearish engulfing candle, buyers extended the rally another 40 pips during yesterday’s session.
But NZDUSD bulls aren’t out of the woods just yet. In fact, the 0.7300 area I mentioned last week is intact and is also responsible for today’s 60 pip selloff.
So far today, data out of the U.S. has been surprisingly positive which has helped push the dollar higher. However, today’s Fed rate decision and statement at 2 pm EST are no doubt the main event. The outcome of which could decide the fate of the NZDUSD, at least in the near-term.
Here’s how I’m approaching the pair in light of the upcoming event risk:
If sellers continue to push prices lower, it’s going to take a daily close below the 0.7235 area to confirm a more substantial decline. And if the last five months have indeed formed a broadening wedge, that decline could continue for several hundred pips.
Buyers, on the other hand, don’t have it so easy. Because of the trend line from the 2016 low, it’s going to take a close above this level to negate the broader bearish trend. At the moment, that area comes in near yesterday’s high at 0.7350.
I’m on the sideline for now waiting to see how today’s FOMC impacts the U.S. dollar. Additional levels and targets to be discussed if and when a favorable setup materializes.
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