NZDUSD is slowly trending higher on its 4-hour time frame, moving inside an ascending channel connecting the recent highs and lows of price action. Price just bounced off the channel support and is on its way to the top, but it is encountering resistance at the mid-channel area of interest.
Stochastic is on the move up, indicating that buyers are in control of price action and that further gains are possible. However, the 100 SMA is below the 200 SMA to show that the path of least resistance is to the downside. In addition, RSI is heading south so NZDUSD might follow suit.
At the moment, the 200 SMA is holding as a dynamic resistance level right around the .6600 major psychological level. If this continues to keep gains in check, a drop to the channel support at .6500 could take place.
Stronger selling pressure might even lead to a downside break of the channel support, depending on how this day’s events unfold. Among the biggest catalysts for a dollar move is Fed Chairperson Yellen’s testimony, as she could provide stronger hints on what the Fed has up its sleeve.
Previously, FOMC voting members have been citing several concerns that could delay a rate hike. For one, the inflation outlook has weakened since oil prices have chalked up another sharp tumble earlier this year. Aside from that, the dollar rallies are also putting a lid on domestic price levels. To top it off, financial conditions are tighter these days and the increased volatility could further complicate matters.
With that, dovish remarks from Yellen could mean a dollar selloff and a bounce for NZDUSD. On the other hand, hawkish comments reassuring that a March rate hike is possible could spur gains and lead to a downside break of the channel support.
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