NZDUSD in the hands of US data dump tonight

NZDUSD in the hands of US data dump tonight

Whilst the Kiwi Dollar remains firmly in the 77c-80c range there is a glimmer of hope for the Kiwi bulls, judging by recent US price action.

The USD Index has sustained 2 bearish closes after printing a fresh 4-year high. The fact that USD closed down for the session yesterday after posting strong GDP figures (0.6% above expectations) serves as a warning for USD bulls. Failure to push higher on good news suggests the buying power is beginning to wane.

Tonight we see another data dump from the US which includes employment, Core Durables Good and inflation data. Of particular interest to traders will be the Core PCE (Personal Consumption Expenditure) as this is the Fed's favoured measurement of inflation. With their target for inflation at 2% and the consensus for Core PCE at 1.5% the closer we get to 2% should be the more bullish for USD (as traders anticipate a rate hike).

The current price action on NZDUSD is open to over-interpretation. The fact remains that until we break out of the 77c-80c range we cannot tell if it is a bearish correction, or market bottom forming. We saw a similar pattern form mid 2013 where the Kiwi whipsaws between 77c-80 before forming a market bottom and starting a new bull run.

But being able to identify this still allows us to create trade plans and use range-trading strategies until a clearer trend becomes established. However there is a glimmer of hope for NZDUSD bulls.

If Core PCE falls flat tonight then I’d expect to see NZD break above 79c to the test 0.7915. Anything below 1.3% could even see it test 0.7970. However if we see PCE above 1.5% then NZDUSD is likely to be driven down to 77c by USD bulls who may have regretted offloading their positions following yesterday’s positive GDP.

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