NZDUSD
NZDUSD is the biggest loser so far today among the majors. As of this writing, the currency pair is down by around 0.85% or 50 pips at 0.5943. The hourly time frame also reveals a bearish technical setup ahead of China’s GDP release. Could this mean that we are in for a sell-off?
The New Zealand dollar, along with the Australian dollar, is sensitive to Chinese data. This is because New Zealand’s commodity-driven economy relies heavily on Chinese demand for growth. Therefore, stellar Chinese data implies strong Chinese economic growth which could translate to sustained demand for New Zealand’s goods. With that said, we could see some volatility tomorrow when China releases its GDP at 3:00 am GMT.
For the first quarter of 2020, the world’s second-largest economy is expected to have contracted by 6.2%. Meanwhile,fixed asset investment for the same period is eyed to show a 15% decline. Industrial production is also anticipated to post a 7.0% contraction, reflecting the adverse consequences of the coronavirus pandemic.
Worse-than-expected data could drive NZDUSD lower. Alternatively, better-than-expected figures may be bullish for the currency pair.
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On the 1-hour time frame, it can be seen that NZDUSD has recently made lower highs after a series of higher highs. Consequently, this has allowed for a head and shoulders pattern to form. The currency pair is currently testing the neckline support around 0.5945. This is considered as a bearish reversal pattern and a strong close below this price level could trigger a sell-off to near-term support around 0.5840.
On the other hand, if NZDUSD trades above today’s highs at 0.5996, the head and shoulders pattern could be invalidated. Instead, it could hint that there may be enough buyers to still push the currency pair to yesterday’s highs at 0.6105.