NZDUSD has been consolidating over the past month, and in light of USD strength there is now an opportunity to enter into a downtrend on the NZD against the USD. The following is my trade thesis:
1 - Understanding Interest Rates.
In Forex, interest rates are crucial in predicting the flow of money between currencies. Essentially, a country with a high interest rate (adjusted for inflation) attracts more investors, increasing demand for its currency. Conversely, a country with a low interest rate sees investors withdrawing their money, decreasing demand for its currency.
US Interest Rate = 5.5% (Cash Rate) - 3.3% (Inflation Rate) = 2.2%
New Zealand Rate = 5.5% (Cash Rate) - 4.0% (Inflation Rate) = 1.5%
Here we can clearly see that the US has a stronger rate than New Zealand. As a result investors will start moving money out of NZD and into stronger currencies such as the USD which will cause NZDUSD to move down in the medium term. (Considering rate hikes and cuts)
2 - Price Targets:
A break and continuation below 0.607 will drive price lower to 0.600 and further down towards 0.594 and 0.586.
3 - News Events to keep in mind:
Friday 28 June - USD Core PCE Price Index
Monday 1 July - USD ISM Manufacturing
Tuesday 2 July - USD Powell Speaks, JOLTS Job Openings
Wednesday 3 July - USD ADP NFP Employment Change, Unemployment Claims, FOMC
Friday 5 July - USD NFP, Unemployment Rate
Wednesday 10 July - NZD Interest Rate (Cash Rate)
Sources: ForexFactory, TradingEconomics.
Good luck guys :)
1 - Understanding Interest Rates.
In Forex, interest rates are crucial in predicting the flow of money between currencies. Essentially, a country with a high interest rate (adjusted for inflation) attracts more investors, increasing demand for its currency. Conversely, a country with a low interest rate sees investors withdrawing their money, decreasing demand for its currency.
US Interest Rate = 5.5% (Cash Rate) - 3.3% (Inflation Rate) = 2.2%
New Zealand Rate = 5.5% (Cash Rate) - 4.0% (Inflation Rate) = 1.5%
Here we can clearly see that the US has a stronger rate than New Zealand. As a result investors will start moving money out of NZD and into stronger currencies such as the USD which will cause NZDUSD to move down in the medium term. (Considering rate hikes and cuts)
2 - Price Targets:
A break and continuation below 0.607 will drive price lower to 0.600 and further down towards 0.594 and 0.586.
3 - News Events to keep in mind:
Friday 28 June - USD Core PCE Price Index
Monday 1 July - USD ISM Manufacturing
Tuesday 2 July - USD Powell Speaks, JOLTS Job Openings
Wednesday 3 July - USD ADP NFP Employment Change, Unemployment Claims, FOMC
Friday 5 July - USD NFP, Unemployment Rate
Wednesday 10 July - NZD Interest Rate (Cash Rate)
Sources: ForexFactory, TradingEconomics.
Good luck guys :)
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.