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Daily FX Brief, May 8 – Top Trade Setups Considering RBNZ OCR Cut!

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Stock Markets Crashes Over Risk Off Sentiment

The stocks managed to pare a large part of losses seen earlier in the session which was triggered by President Donald Trump’s threats to impose more tariffs against Chinese goods. Once shedding over 450 points, the Dow Jones Industrial Average closed 66 points lower (-0.3%) to 26438. The S&P 500 lost 13 points (-0.5%) to 2932, and the Nasdaq Composite was down 40 points (-0.5%) to 8123. Safe-haven assets expanded bids as worries escalated a trade war between the U.S. and China diminished investors’ risk appetite.

RBNZ Monetary Policy Decision

There was a time when the Australian economy was a leader in adjusting the interest rates, and New Zealand used to follow and adopt the strategy. But it may come as a shock that New Zealand
has also been leading us in the financial field.

Today, the Reserve Bank of New Zealand (RBNZ) chose to deliver the interest rate cut that Australia’s central bank passed on yesterday. The RBNZ has voted to lower its official cash rate by 25 basis points, bringing it down to the same level as Australia’s at 1.5%. As a result, there’s been a massive sell-off in the Kiwi. The market is still trading in the chaos.

NZD/USD – Bearish Channel Remains Intact

The technical outlook of the NZD/USD recommends entering this trade at any price between 0.65958 and 0.66132.

The 14-period Average True Range on a daily chart is 0.0007, so the stop loss has been set at 0.66393.

The 20, 25 and 50 EMA are resting around 0.66132 and may give a hard time to NZD/USD bulls today.

NZD/USD recently closed a Doji candle below 0.6601 on the 2-hour chart, signalling weak bullish bias of traders.

Support and Resistance
R3: 0.6729
R2: 0.6682
R1: 0.6663
Key Trading Level: 0.6635
S1: 0.6616
S2: 0.6587
S3: 0.654

NZD/USD – Key Trade Idea

As discussed earlier, 0.6630 area carries much importance due to EMA resistance and double bottom support, which is now working as a resistance. Therefore, consider staying bearish below 0.6630 level to target 0.6580 and 0.6555.

EUR/USD – ECB Monetary Policy Meeting Accounts Awaited

Besides New Zealand Dollar, the single currency Euro is also in the limelight as investors await ECB Monetary Policy Meeting Accounts later today.

What to Expect from ECB Policy Meeting Accounts?
The European Central Banks kept its plan steady in April as expected. President Mario Draghi reiterated the stand that “risks are moving to the downside” but decided to balance things out by discussing the upbeat spots beside the concerns.

ECB Policy Meeting Accounts usually repeats the same points made in the announcement, but this time the tone may be redacted to be more confident after the euro-zone GDP grew to 0.4% QoQ. Markets would love to evaluate when the next rate adjustment is occurring.

On the technical front, EUR/USD has recently tested levels just above 1.11, bulls didn’t let the euro drop lower. On the daily chart, we can clearly see that the second low set on Friday, May 3, was higher than the one of late April.

The candlestick with the extended lower wick provided EUR/USD bullish momentum. The pair is over the weekly pivot point 1.1199, and it may now jump to test 1.1215.

Support and Resistance
R3: 1.1322
R2: 1.1251
R1: 1.1227
Key Trading Level: 1.1181
S1: 1.1156
S2: 1.111
S3: 1.104

EUR/USD – Key Trade Idea

Consider staying bullish above 1.1215 and bearish below the same level with a stop loss of 30 pips and take profit of 40 pips. All the best!

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