August 16, 2021

The Week Ahead in FX (Aug. 16 – 20): RBNZ To Hike Rates?

 The main event on this week’s schedule is the RBNZ decision, as market watchers are counting on the first rate hike among the major central banks.

Aside from that, there are plenty of other top-tier events worth trading in the next few days.

Don’t forget to review which factors drove forex market price action last week, too.

Major Economic Events:

U.S. retail sales (Aug. 17, 12:30 pm GMT) – Dollar pairs might get an early dose of volatility this week, as Uncle Sam is scheduled to print the July retail sales report.

Consumer spending likely took a hit during the month, with the headline figure slated to show a meager 0.2% uptick versus the earlier 1.3% gain. The core version of the report might even show a 0.2% drop after the previous 0.6% increase.

RBNZ interest rate decision (Aug. 18, 2:00 am GMT) – All eyes and ears might be on the RBNZ this week since the central bank is widely expected to hike rates from 0.25% to 0.50%.

These hawkish expectations are supported by stronger than expected quarterly inflation and employment figures, as New Zealand has been weathering the pandemic far better than its peers.

Recall that the RBNZ already committed to scaling back its easing program as early as July, which suggests that policymakers are keen on keeping price pressures in check.

FOMC meeting minutes (Aug. 18, 6:00 pm GMT) – Another major central bank event to keep tabs on is the release of the FOMC minutes, which should shed more light on whether more policymakers are shifting to a more optimistic stance or not.

In their latest rate statement, the Fed refrained from giving a timeline for tapering asset purchases, citing that they’d like to see “substantial further progress has been made toward its maximum employment and price stability goals” before making adjustments.

Australian employment change (Aug. 19, 1:30 am GMT) – Over in the Land Down Under, hiring is expected to have slowed in July due to the reinstated and extended lockdown measures over the past few weeks.

The employment change reading for the month could show a 46K drop, erasing the earlier 29.1K gain and more. This might be enough to bring the unemployment rate up from 4.9% to 5.0%.

Forex Setup of the Week: NZD/CHF

With the RBNZ likely to hike this week, I’m keeping bullish Kiwi setups on my radar!

This break-and-retest setup on NZD/CHF looks like a good play, as it could offer plenty of long-term upside.

The pair just broke above its descending channel on the daily time frame, signaling that a big reversal is underway.

Stochastic is suggesting that buyers could use a break, though, so a pullback could follow from here. The Fib tool shows where more buyers could hop in, and the 50% level that lines up with the .6400 handle and former channel resistance seems to be a good spot.

The RBNZ decision could bring extra volatility for this pair and, if support holds then, NZD/CHF could zoom right back up to the swing high at .6500 and beyond.