NZD/USD Forex Trading Review – May 7, 2014

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NZD/USD Forex Trading Review - May 7, 2014

NZD/USD Forex Trading Review - May 7, 2014

In this forex trading review, we have a possible break and retest scenario playing out on NZD/USD’s 4-hour forex chart. As you can see from the price action above, the pair recently broke above the .8700 major psychological resistance, indicating that buyers are ready to push the pair higher.

This upside break was spurred by a pick-up in risk appetite in yesterday’s trading sessions and was supported by a stronger than expected quarterly jobs report from New Zealand. However, a deeper pullback was seen later in the Asian forex trading session when the dairy auction in the country still showed a considerable decline in prices.

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As it turns out, dairy prices have fallen 1.1% recently although order volumes have picked up. Despite that, the Kiwi could hold on to its bullish bias since the Reserve Bank of New Zealand remains one of the more hawkish central banks around.

Recall that the RBNZ recently implemented consecutive interest rate hikes as part of its monetary policy tightening efforts. This has driven the Kiwi higher in value, increasing the odds of further jawboning from central bank officials. After all, an appreciating local currency could wind up hurting the country’s exports since it makes the products more expensive in international trade.

The positive carry is still an important factor to consider in this forex trading review though and this explains why investors are keen to park their money in the New Zealand dollar more than any other major currency. The recent decline in dairy prices and weaker inflationary pressures could force the RBNZ to tone down its hawkishness though in fear of pushing the Kiwi higher and worsening inflation.

To contact the reporter of the story: Marco Roemer at marco@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.