REMEMBER: The low AFTER the last hike was 0.6876
The RBNZ was the first of the “majors” to tighten policy when on October 6, they raised rates by 0.25% to 0.50 there is %. The RBNZ are expected to announce another hike in the OCR by 0.25 basis points, but there is some chance of a more bolder 50 basis point hike. Despite the expectations, the NZDUSD has been stepping down on the back of the higher USD.
Recall at the last meeting, the price of the NZDUSD initially moved higher only to reverse and tumble to a cycle low at 0.6876. That low has been the low since that day.
In between that low and today, the price raced up to a high of 0.72179 on October 21, which was then equaled (well within a few pips) on October 28. Since that double top, the price has stepped lower two the lowest level since October 13 at 0.69153 today. The current price is trading at 0.69427.
The low today stalled in a swing area between 0.6907 and 0.69227. Dip buyers leaned within that area ahead of the October 6 low at 0.6876.
If there is a hike of 50 basis point or if the statement/comments are more hawkish, the selloff should be over and we should see a rotation back higher. On the topside,
- Swing highs between 0.6969 and 0.69809 and
- The falling 100 and 200 hour moving averages at 0.6993 and 0.7009 (and moving lower) would be levels to get to and through on the topside.
- The 100 day moving average at 0.70213 is another upside target that if broken, would give the buyers more ammunition and control from their technical “wins”.
Alternatively, if the October 6 price action repeats itself, a move back down to retest that low at 0.6876 would be a fun level to stick a toe the water with stops on a momentum move below.
A repeat of history in the forex like what is setting up on the rate hike day ahead in the NZDUSD does not happen often. However, if you go back to October 6, the level was around 0.6950 just ahead of the release. The current price is within 10 pips of that level. Will the price go down and test 0.6876? Or will the price rise and test the 0.69809 area and break back higher?