Potential bear flag on NZD/USD
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The combination of hawkish Fed speak and firmer inflation has seen the US dollar strengthen overnight. But we're interested in shorting the Kiwi dollar against it, given yesterday's lower forecasts for 2 and 3-year inflation forecasts by RBNZ. It should be noted that RBNZ hold their monetary policy meeting on Wednesday February the 22nd, and there has been call for a 50 or 75bp hike.
But that doesn't mean it can't dip lower ahead of the meeting, even if they do go for another aggressive hike - especially if Fed members continue to read from the same hawkish script.
NZD/USD has spent nearly 7 days within a sideways channel / consolidation, after an aggressive bearish reversal from its YTD high. A double top has formed around 0.6400 to suggest demand resides in the area, so the bias is now for a bear-flag breakout in line with the momentum which took it into consolidation.
- Bears can either seek a break of the cycle low, or the channel around 0.6294 to assume bearish continuation.
- The lows around 0.6200 make a likely target for bears and risks a corrective bounce
- The eventual target projected form the bearish flag is around 0.6120
But that doesn't mean it can't dip lower ahead of the meeting, even if they do go for another aggressive hike - especially if Fed members continue to read from the same hawkish script.
NZD/USD has spent nearly 7 days within a sideways channel / consolidation, after an aggressive bearish reversal from its YTD high. A double top has formed around 0.6400 to suggest demand resides in the area, so the bias is now for a bear-flag breakout in line with the momentum which took it into consolidation.
- Bears can either seek a break of the cycle low, or the channel around 0.6294 to assume bearish continuation.
- The lows around 0.6200 make a likely target for bears and risks a corrective bounce
- The eventual target projected form the bearish flag is around 0.6120
Nota
We saw the bearish breakout just after the original post. This was then accompanied with a nice pullback to the breakout area, and momentum has since returned in line with our bias - and approaching the January lows. We may even see a break beneath it, judging from the bullish sentiment towards the dollar heading into the weekend.Nota
First target was reached, and the bounce higher from support is on the small-size considering the RBNZ's 50bp hawkish hike. In fact, prices are now consolidating, and show the potential to break below 0.6190 and head for the second target around 0.612 (bear flag / 100% projection).
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