Start your trading week right by prepping for these top-tier catalysts and checking out my potential trade setup.
Don’t forget to review which factors drove forex market price action last week, too!
Major Economic Events:
RBNZ monetary policy statement (May 26, 2:00 am GMT) – No actual changes to the 0.25% interest rate are expected from New Zealand’s central bank this time.
However, the pressure is mounting for the RBNZ to start reducing its large-scale asset purchases since other central banks like the BOC and BOE have started to do so.
Economic data has been more or less stable, with the freshly-released quarterly retail sales data posting surprise gains instead of the projected dips. Still, the RBNZ might opt to let inflation overshoot its target before shifting to a more hawkish stance.
U.S. preliminary GDP (May 27, 12:30 pm GMT) – The flash GDP release for the first quarter of the year indicated a 6.4% growth figure, and no revisions are eyed for the second version of this report.
Note that the minutes of the latest FOMC meeting revealed that some policymakers are looking into tapering asset purchases, so any upside surprise could be bullish for the Greenback.
U.S. core PCE price index (May 28, 12:30 pm GMT) – Being the Fed’s preferred inflation measure, this report could generate a strong reaction from dollar pairs this week.
An uptick in price pressures from 0.4% to 0.6% in April is eyed, which would bring the annual rate to 2.4% – its highest level since 2007.
Weaker than expected results, however, could mean that the Fed might push back its taper talks.
Forex Setup of the Week: NZD/USD
With the RBNZ decision coming up, I’m watching this head and shoulders setup on NZD/USD this week.
Price has yet to test the neckline support around the .7135 level, and a breakdown could confirm that a reversal would follow.
Cautious remarks from RBNZ policymakers might be enough to trigger a selloff since this would be very disappointing for Kiwi bulls expecting hawkish hints.
If that happens, NZD/USD could tumble by the same height as the chart formation, which spans roughly 150 pips. The 100 SMA is above the 200 SMA for now, but the gap between the moving averages is narrowing enough to hint at a possible bearish crossover.
