NZD/USD might be due for a forex signal bounce this week, as the US gears up to release a downward revision in its Q1 GDP reading. The figure was initially reported at 0.1% but analysts predict that the second version could show a downgrade to -0.6%, effectively showing an economic contraction for the period.
This forex signal could trigger a rally for NZD/USD back to the previous highs around the .8700 levels. Stochastic is showing a shallow bullish divergence, as the oscillator made higher lows while price made lower lows.
On the other hand, a break could lead to forex signal of a sharper selloff if the GDP reading comes in strong. There are no reports due from New Zealand this week but data from the economy has been relatively strong. Going long at the current levels and aiming for .8700 with a 50-pip stop could yield at least a 3:1 return on risk.
Forex Signal for NZD
Earlier this week, the US economy reported a stronger than expected headline durable goods orders figure and a mere 0.1% uptick in core durable goods orders. As for the Q1 GDP release later on, the downward revision could be spurred by downgrades in business investment and capital equipment spending.
In that case, the US dollar could wind up losing ground across the board as it would be a forex signal for the Fed to hit the brakes on its ongoing taper. Remember that FOMC officials are watching a set of data points closely in order to determine whether or not they should continue reducing stimulus efforts and eventually move closer to hiking interest rates. Any indication of a possible delay in this tightening move could be negative for the US dollar.
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