NZDUSD is still moving in a downtrend, creating a potential short FX setup at the top of the falling trend channel on its 4-hour time frame. Price has formed a long-wicked candle, indicating that sellers are inclined to keep gains in check.
Stochastic is still moving up though, which means that there may be enough buying pressure to lead to an actual test of the channel resistance near the .7850 minor psychological mark. Once the selloff resumes, NZDUSD could make its way back to the bottom of the range at the .7600 major psychological handle.
FX Setup Details
There are no remaining event risks for this FX setup today from New Zealand, as the RBNZ already had its interest rate decision. RBNZ Governor Wheeler highlighted the pickup in housing inflation, sparking talks that a rate hike might be needed to keep price pressures at bay. However, given the weak state of the New Zealand economy, this tightening move seems unlikely.
From the US, the retail sales release might prove to be a big mover for dollar pairs, as spending is likely to make a strong increase. Higher shopping activity during the Thanksgiving holidays and prior to the Christmas season might’ve spurred a huge jump in sales, which are also supported by the better than expected pickup in hiring for November.
In that case, the path of least resistance for NZDUSD is to the downside, validating this short FX setup. Shorting at market with a stop above the recent spike and a target of .7600 could yield a good return on risk for a day trade.
Risk aversion might make a return to the markets in the coming days, as the Greek snap vote draws near. This should determine the fate of the Greek government, their bailout package, and their economic performance. Any updates on this event could have a huge impact on FX setup outcomes.
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