NZDUSD
After trading higher on news that New Zealand would ease its lockdown restrictions next week, NZDUSD is the biggest loser among the major currencies. Its losses today were brought about by dovish remarks from RBNZ Governor Adrian Orr. The currency pair is currently down by close to 0.70% or 40 pips as it trades at 0.5996.
According to the RBNZ head, policymakers are considering directly monetizing government debt. What this means is that the central bank would directly buy government bonds. This is a little different from quantitative easing wherein a monetary authority purchases bonds through the financial markets. Consequently, his remarks hinted to investors that the RBNZ is looking to aggressively stimulate the economy. With this, Orr also announced that they may add more stimulus in May. Whether or not the RBNZ will push through with this plan, we will find out then.
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On the 4-hour time frame, it can be seen that NZDUSD has formed lower highs after a series of higher highs. Consequently, this has allowed for a head and shoulders pattern to materialize. This is widely considered as a bearish reversal indicator. A strong bearish close below the neckline support at 0.5956 could mean that the currency pair has room to trade lower. Near-term support could be around the 0.5600 psychological handle where NZDUSD bottomed on March 20.
On the other hand, if there are enough buyers to push price above its recent high at 0.6091, it could be enough to invalidate the head and shoulders pattern. It could suggest that NZDUSD may still rally to its recent highs at 0.6125 where it topped on April 14. If resistance at that price does not hold, the next ceiling could be at 0.6200 where the falling trend line is (from connecting the highs of December 31 and March 9).