RBNZ Governor Graeme Wheeler also adopted forward guidance in his latest rate decision in saying that the central bank is looking to increase interest rates by next year. According to him, the recovery in the housing sector and the rise in commodity prices could lift inflationary pressures and require a rate hike.

NZD/USD is currently trading at the top of its recent range around the .8100 major psychological level. Sustained buying momentum could eventually trigger a sharp breakout throughout the rest of the trading sessions, pushing NZD/USD to new highs.

The size of the recent range is around 350 pips so the upside break might be of the same size. Setting a 100-pip stop and going long at market would yield a good reward-to-risk ratio.

By Kate Curtis from Trader’s Way