NZDUSD is moving inside a rising wedge pattern on its 1-hour forex chart and is currently testing the top of the range, waiting for a forex breakout. A bearish divergence can be seen, as price made higher highs while stochastic had lower highs, indicating that selling pressure might pick up.
If the top of the wedge holds as resistance, price might move back to the bottom around the .7500 major psychological level. Increased bearish momentum could trigger a downside forex breakout from support and a longer-term selloff for NZDUSD. This could last by around 300 pips, which is roughly the same height as the chart pattern.
Forex Breakout Setup
Bear in mind though that the latest FOMC minutes indicated that officials aren’t eager to hike rates just yet, citing external threats and potential risks associated with tightening monetary policy too soon. After all, economic growth in China has been slowing down and may lead to a downturn in the global economy.
Meanwhile, inflation reports from New Zealand have been mixed, as producer input prices marked a worse than expected 0.4% drop while producer output prices indicated a better than expected 0.1% decline. Earlier in the week, New Zealand printed stronger than expected quarterly retail sales figures.
Risk sentiment has been in favor of the higher-yielding commodity currency recently, as geopolitical tensions appear to be subsiding in Russia and Ukraine. However, the lack of a debt deal for Greece so far this week has been keeping gains in check. Any positive developments on this situation could lead to an upside forex breakout from the pair’s rising wedge pattern and further gains for NZDUSD.
On the other hand, a continued standoff between the EU and Greece could usher risk aversion back in and drive the Kiwi lower against the dollar. No other major reports are lined up from the US and New Zealand economies for the rest of the week.
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