NZD/USD
The Federal reserve is set to meet later on in the American session and is expected to hike rates up to 2.0%. This will give the US the highest interest rates of all developed countries. This move is widely expected, but the forward guidance as to the number of future hikes is going to be key in the dollars reaction after the meeting. One chart that stands out for a good long USD play is the NZD/USD.
At the end of June, on the 27th, Governor Orr will most likely re-iterate his dovish stance. There has been very little released in the way of NZD data since he last spoke to the markets, so it is hard to see how his message can be anything other then a cautious warning about NZD headwinds. Recently the USD has been sold against the NZD and price has pulled back to the 38.2 Fib level on the daily chart. The price is reacting off that fib level and the 50 DMA (yellow line). With the 100 and 200 DMA just above price there is a lot of technical resistance to set your stops against.
The rate differential between the Fed and the RBNZ is going to be potentially attractive for investors as the carry trade comes into play. Equities have held their uptrend positions and this could be an early time to enter into this carry trade for the long haul.
Now when to enter this trade is key. Jump in now and you have to ride the Fed rate announcement. That could go wrong. Alternatively, wait for the Fed to release their rate announcement and check the forward guidance to see if a longer term set up is valid between the NZD and the USD. You could always enter in a retracement of the announcement and put stops above the 61.8% level of the last Daily down move. That seems a sensible mid-way point to get the best value , with the least risk.
