NZDCHF Channel Forex Breakout – Aug 20, 2014

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NZDCHF Channel Forex Breakout - Aug 20, 2014

NZDCHF Channel Forex Breakout - Aug 20, 2014

NZDCHF has been moving inside a rising channel since March this year but it appears that a forex breakout is already taking place. The latest wave lower has been sparked by the RBNZ’s decision to pause with its rate hikes to assess the impact of tightening on the New Zealand economy. For the past few weeks, data from the country has been reflecting economic weakness.

With that, NZDCHF is making an attempt at a forex breakout below the .7650 minor psychological level around the channel support. At the same time, stochastic is moving down, indicating that selling pressure is strong enough to push the pair lower. A move below the near-term support at .7635 could mean more losses for the pair.

Forex Breakout Scenarios

A prolonged downtrend after a forex breakout could take NZDCHF to the next area of interest near the .7450 minor psychological level. Further losses could even push it all the way down to the .7250 area.

On the other hand, renewed buying momentum could lift price back up to the middle of the channel, which is around the .7850 minor psychological mark. Further gains could carry it back to the top of the channel at .7950.

Inflation reports from New Zealand have been disappointing, as the PPI releases showed weaker than expected gains in input and output prices. After that, inflation expectations for the quarter were revised down from 2.4% to 2.2%. Dairy prices have been falling in the country for months, leading to speculations that revenue and profits will continue to decline.

As for the franc, the lack of economic data has left it as a counter currency and sensitive to risk sentiment. A surge in risk aversion could support this potential forex breakout and keep the franc supported for the next few days. Should this prove to be a fake out though, risk appetite could lead to a Kiwi boost.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.