NZDUSD has been trending higher and moving inside a rising channel pattern on its 4-hour time frame. Price is now testing the channel support at .6600 and might be due for a bounce if the trend remains intact.
Technical indicators are suggesting that the uptrend could resume, as the 100 SMA is above the 200 SMA showing that the path of least resistance is to the upside. Meanwhile, RSI is already in the oversold zone and starting to turn higher while stochastic is also indicating oversold conditions.
However, a break below the channel support could be a sign that a reversal is in order. This could take NZDUSD to the next area of interest at .6500 or much lower.
Earlier today, the GDT auction in New Zealand showed a 2.9% drop in dairy prices after the previous 1.4% bounce. This suggests that the slump in the industry is still in place, possibly leading to another cut in payout forecasts for farmers.New Zealand’s current account balance reflected the impact of falling dairy prices on the economy, as the deficit was mostly spurred by a 13% decline in dairy prices.
Also, keep in mind that the RBNZ recently cut interest rates so demand for NZD is lower these days. The FOMC statement is coming up and any indication that the Fed can still be able to tighten monetary policy later on in the year could lead to a strong boost for the dollar. However, data from the US economy turned out mixed yesterday, as headline and core retail sales both posted 0.1% declines.
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