RBNZ may get Its Cue from RBA Tomorrow

New Zealand releases its employment data on Wednesday with expectations for the Employment Change for Q3 to rise 0.3% from an increase of 0.8% in Q2.  Next week, the RBNZ will meet and will decide whether they should cut key overnight interest rates or leave them on hold at 1.0%.  But for the RBNZ, its not quite as simple as looking at their own economy.  The RBNZ must also take into consideration China data and the China-US trade war, as China is a key importer from New Zealand. Currently, the market has mixed expectations as to whether they will cut or remain on hold.  However, the markets may get a good idea as to what to expect from the RBA tomorrow when they meet and give their outlook on the economy and growth.

On a daily chart, NZD/USD broke out an inverted head and shoulders pattern on October 18^th.  The pair halted at the 38.2% Fibonacci retracement level near .6438 from the highs on July 19^th to the lows on October 1^st.  It pulled back to retest the neckline and traded back up to the 38% retracement.  On Friday, it appeared the pair was going to head higher to the Inverted head and shoulders target near .6505, however it reversed during the day to put in a shooting star candlestick formation.  Today, NZD/USD put in a bearish engulfing pattern, which implies the bears managed to take control and the pair may be headed lower.

Source: Tradingview, City Index

On a 240-minute chart, there is clear divergence between the RSI and price.  As price was moving higher, the RSI was moving lower.    NZD/USD sold off from the European session open until the US close, as the DXY traded higher.  The pair closed the day down almost -0.5%,  between the 50% and the 61.8% retracement levels of the October 30^th low to todays highs, near .6395. 

Source: Tradingview, City Index

Not surprisingly, AUD/USD also put in a bearish engulfing candlestick formation as the DXY traded higher as well.  The pair closed down -.43% near .6882, while the DXY was closed up +.43% near 97.54.

Source: Tradingview, City Index

In a few hours we will know exactly where the RBA stands in terms of their economic outlook.  If you are trading the NZD/USD, take cues from both the RBA and the AUD/USD as to what the RBNZ may be considering when they meet next week! (The NZD/USD should begin pricing in expectations).