On Monday, New Zealand Dollar (NZD) jumped after Adrian Orr was appointed the new Central Bank Governor.
Orr is an experienced central banker who has worked as the deputy governor and economist. Previously, he led the country’s $26 billion sovereign wealth fund.
Investors were optimistic that he will be able to change the RBNZ without weakening the bank’s resolve of fighting inflation. RBNZ is trying to transition to a Fed-style central bank aimed at price stability and maintaining full employment.
Yesterday’s gained to the NZD continued overnight when the pair reached a two-week high against the dollar.
At this price level, should the NZD/USD bulls might not know what to do continue holding on to their long positions or exit?
This week, we expect no major economic data from New Zealand. So, most of the movements will come from the U.S. side.
Today, the Fed will start its final meeting for this year and announce its interest rate decision tomorrow. This will be big news, although most investors anticipate a rate hike. Investors will be looking at the Fed’s statement which will give them an indication on what to expect in the coming year. A disappointment from the U.S side could take the NZD higher while good indications could put pressure on the NZD.
Since 23rd October, the NZD/USD pair has been showing a near-perfect support and resistance as shown below. The red arrows show points of false breakouts.
The support for this pattern has been 0.6780 while the resistance has been 0.69774. As of this writing, the pair is trading at 0.6926.
So, the two probable expectations are: the pair breaks the channel and moves upside or reverses to the support area. The 4-hour chart has the RSI at 62, which gives an indication of an upside.
For the remaining part of the week, two things could happen, and it will all depend on tomorrow’s statement from the Fed. A good indication from the Fed could lead the pair to below the support area while a negative reading could break the resistance and possibly go up to 0.7055.