Source: PaxForex Premium Analytics Portal, Fundamental Insight
The Reserve Bank of New Zealand raised interest rates by 50 basis points to 2.00%. Economists predicted a 50 basis point hike. Forex traders can compare this to the Reserve Bank of New Zealand's previous interest rate announcement, where the RBNZ hiked rates by 50 basis points to 1.50%. It marks the fifth consecutive tightening in monetary policy following three 25 basis point increases. The central bank added that more aggressive interest increases are ahead, with at least two more 50 basis point hikes priced by markets. The RBNZ also raised its inflation forecast and is likely to adjust its inflation outlook upwards.
US Preliminary Durable Goods Orders for April are predicted to increase by 0.6% monthly, and Durables Excluding Transportation by 0.6% monthly. Forex traders can compare this to US Durable Goods Orders for March, which rose 0.8% monthly, and Durables Excluding Transportation by 1.2% monthly. Capital Goods Orders Non-Defense Excluding Aircraft for April are predicted to rise 0.5% monthly. Forex traders can compare this to Capital Goods Orders Non-Defense Excluding Aircraft for March, which increased 0.9% monthly.
US Crude Oil Inventories for the week ending May 20th are predicted at -0.737M. Traders can compare this to US Crude Oil Inventories for the week ending May 13th, reported at -3.394M. US Gasoline Inventories for the week ending May 20th are predicted at -0.634M and US Distillate Stocks at 0.917M. Forex traders can compare this to US Gasoline Inventories for the week ending May 13th, reported at -4.779M, and US Distillate Stocks at 1.235M.
Yesterday's PMI data showed a worse-than-expected slowdown in the US services sector. A regional manufacturing index unexpectedly showed a sharp contraction, new home sales plunged, and auto credit delinquencies are near record highs. The US Federal Reserve remains behind the curve on inflation. Its previous policies and ignorance forced the central bank into a corner to hike interest rates aggressively while the economy remains on the verge of a recession. The outlook for the US Dollar continues to worsen, and a long period of stagflation may follow a recession.
The forecast for the NZD/USD remains cautiously bullish despite its rally into its descending Ichimoku Kinko Hyo Cloud, which shows signs of stabilizing with the Senkou Span B entering a sideways trend. Adding to the positive outlook is the ascending Tenkan-sen, and a bullish crossover above the flat Kijun-sen can add new buy orders. Traders should monitor the CCI, which moved into extreme overbought conditions. A temporary breakdown is possible, but this technical indicator is expected to remain above zero, confirming ongoing bullishness. Can bulls overcome a short-term bearish attack and keep pushing the NZD/USD towards its horizontal resistance area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the NZD/USD remain inside the or breakout above 0.6425 to 0.6525 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 0.6475
- Take Profit Zone: 0.6910 – 0.6810
- Stop Loss Level: 0.6360
Should price action for the NZD/USD breakdown below 0.6425, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 0.6360
- Take Profit Zone: 0.6210 – 0.6275
- Stop Loss Level: 0.6425
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