NZDUSD is testing the top of the forex range on its 4-hour chart, indicating that selling pressure might return sooner or later. Price is finding resistance at the .7850 minor psychological level and might be headed for the bottom of the range at the .7650 minor psychological level.
Stochastic is moving up though, suggesting that an upside forex range break is possible. If so, the resulting rally might last by at least 200 pips, which is the same height as the chart pattern. This could lead to a move until the .8050 minor psychological level.
Forex Range Setup
The US dollar is under heavy selling pressure for the time being, as data from the US economy has failed to impress. Yesterday’s set showed mixed results, with weaker than expected initial jobless claims and Philly Fed index. Meanwhile, the core PPI came in stronger than expected while the headline figure marked a 0.3% decline as expected.
The event risk for this forex range setup today is the US CPI release, which could also show a 0.3% decline for the headline figure and a mere 0.1% uptick for the core figure. Weak inflation readings could undermine the Fed’s tightening bias and lead to more declines for the US dollar, along with a pickup in risk sentiment.
There have been no major reports released from New Zealand so far and none are lined up for today. This suggests that NZDUSD price action could be mostly influenced by risk sentiment, particularly if there are any major announcements in today’s Asian trading session.
Bear in mind that the Korean central bank recently slashed growth and inflation forecasts while the Indian central bank surprised with a rate cut. This sparked risk aversion in yesterday’s Asian session, although most higher-yielders were able to recover later on. The SNB’s announcement about removing the franc cap also led to large market moves.
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