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Market Outlook and Review Ahead of RBNZ Rate Decision and a Slew of PMIs

Market Outlook and Review Ahead of RBNZ Rate Decision and a Slew of PMIs, FP Markets

Charts: TradingView

Today offers a busy economic calendar for traders and investors to work with.

First on the menu is the Reserve Bank of New Zealand (RBNZ) Official Cash Rate Decision at 1:00 am GMT. The central bank is poised to increase its Cash Rate by 75 basis points (0.75%) to 4.25%, effectively unleashing its largest rate increase since its inception in 1990. As of writing, short-term interest rate derivatives shows a 67.1% chance of a 75 basis-point increase, with a 32.9% probability of a 50 basis-point rise. Additionally, according to a Reuters poll, 15 of 23 economists anticipate the RBNZ to hike by 75 basis points (Reuters, 2022). A technical view of the NZD/USD currency pair ahead of the event can be found below.

Another highlight today, of course, are the Flash PMIs out of the eurozone, UK and the US, released throughout European and US trading hours. Focus for the eurozone, however, will be on the German and French PMIs given they remain the largest contributors to the eurozone economy. The French data is released at 8:15 am GMT and 15 minutes later at 8:30 am GMT we will have the German flash numbers.

NZD/USD Offering Short-Term Rangebound Environment

As evidenced from the daily timeframe of NZD/USD, buyers and sellers are squaring off after retesting resistance-turned support from $0.6082. This follows the break of trendline resistance, taken from the high $0.7034. While further upside could be seen in the currency pair over the coming weeks towards resistance from $0.6527, based on these two technical elements, do bear in mind that the trend remains to the downside in terms of price structure (we have yet to see a meaningful higher high and higher low establish).

The picture on the H1 timeframe shows a clear range formed between $0.6064 and $0.6194 (note that the lower edge of the consolidation is accompanied by a 38.2% Fibonacci retracement ratio at $0.6064). Outside of this area calls attention to the $0.62 and $0.60 psychological figures.

Given the daily timeframe has price action rebounding from support at $0.6082, technical studies suggest the H1 timeframe is likely to break the upper edge of the range. Supporting this, traders may acknowledge that H1 price formed a swing low around $0.6087 on 21 November, leaving the lower edge of the aforementioned range unchallenged. This informs market participants that sellers are perhaps growing weaker within the area and may lead to a run higher eventually.

As a result of the above, a breakout above the upper edge of the H1 range ($0.6194) is anticipated.

Market Outlook and Review Ahead of RBNZ Rate Decision and a Slew of PMIs, FP MarketsEUR/USD: Clear Technical Juncture Remains on the Higher Timeframes

Europe’s shared currency snapped a three-day bearish phase on Tuesday, following the earlier rejection from the lower side of the 200-day simple moving average at $1.0401 and resistance at $1.0377 on the daily timeframe (note that this was aided by a near-test of overbought space on the relative strength index [RSI]). Support warrants attention at $1.0090, while engulfing the said resistances throws light on resistance coming in at $1.0602.

The research team noted the following in recent analysis (italics):

Price action on the weekly timeframe has been rooted in an unmistakable bear trend since pencilling in a top in early 2021, with the recent pullback of 10.0% standing as the only notable upside correction since the said trend emerged. Also of technical relevance on the weekly scale is the break of resistance at $1.0298, which, as you can see, is now being retested as support. Overhead, scope is seen to approach Quasimodo support-turned resistance at $1.0778.

Although the trend is beginning to show signs of strength on the daily timeframe (consecutive higher highs/lows), the weekly timeframe clearly shows this market’s trend direction is facing only one way for the time being: south. As such, sellers making a show from daily resistance and the 200-day simple moving average should not surprise.

The question is will weekly buyers hold support at $1.0298, or will daily price continue to fade resistance at $1.0377, in line with the current downtrend.

EUR/USD Short-Term View

Price action on the H1 retested the underside of $1.03 during US hours on Tuesday (as well as a 38.2% Fibonacci retracement at $1.0306), following a rebound from the 1.272% Fibonacci projection at $1.0229. Above $1.03 we can see that we have a 61.8% Fibonacci retracement at $1.0357, followed by $1.04.

Market Outlook and Review Ahead of RBNZ Rate Decision and a Slew of PMIs, FP MarketsReferences

Reuters, 2022. RBNZ set to deliver biggest rate hike ever as it eyes three month break. [Online] Available at: https://www.reuters.com/markets/rates-bonds/rbnz-set-deliver-biggest-rate-hike-ever-it-eyes-three-month-break-2022-11-22/
[Accessed Tuesday November 2022].

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

 

 

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