The Federal Open Market Committee (FOMC) meeting on Wednesday was a game-changer for the Forex markets. The Fed, which was previously one of the most relaxed of the major central banks when it came to unwinding its extraordinary monetary policy, is now one of the few that has specified a timeframe. Following the Fed’s shift in attitude on inflation, the US dollar surged versus major and minor currencies. The financial markets have been reset on a massive scale as a result of the Federal Open Market Committee (FOMC) meeting. However this shift will not change the long term outlook of US dollar or any other instrument on the board. Although there is a risk in short-term US Currency conditions, the weakness of New Zealand dollar still persist.
Weakest Currency: NZD
Strongest Currency: CAD, USD
Best Instruments to Focus:
Long GBPNZD
Short NZDCAD
The New Zealand dollar has been the weakest currency on the board, with the best trading pairs NZDUSD, GBPNZD, and NZDCAD. GBPNZD stays the most bullish instrument based on price movement, with hundreds of pips to go higher. Last month, we presented 1.98 resistance and a pullback. We stated clearly that the pullback from 1.98 would be a buying opportunity with thousands of pips of upside potential. The instrument has broken through 1.98 and is seeking for more upward momentum. However, because the instrument is highly volatile, there will always be large corrections.
The complex cup and handle pattern is followed by a W bottom above the baseline support in the chart below, indicating a strong bullish formations. The inverted head and shoulder are now constructed above the baseline support. By pulling from the 1.98 region, the right shoulder of the inverted head and shoulder was discovered, which is now complete. The instrument will continue to rise as long as the base line support holds.
The other great instrument to trade is the NZDCAD. The instrument delivered its initial sell signal on the charts in March, followed by a second sell signal in April. This chart, which we showed a few weeks ago, is very negative since rising wedge patterns result in bearish breakout. The pair is projected to break down, but traders should remain cautious in the short term because the instrument is currently trading at much lower levels.