NZDUSD got rejected in its test of the descending triangle resistance and is now moving back to the bottom around the .6500 major psychological level.

Whether a bounce or a break takes place depends on the outcome of the economic reports from New Zealand in the next few days.

If support holds, the pair could make another test of the triangle resistance near the .6600 major psychological level. But if it breaks, price could fall by around 200 pips or the same height as the chart pattern.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, stochastic is starting to move out of the oversold zone, signaling that a bounce might take place. RSI is on middle ground, barely offering good signals at the moment.

New Zealand will be having another dairy trade auction within the week and a drop in dairy prices is expected. In that case, NZDUSD could be in for a sharp selloff, depending on the magnitude of the decline. Aside from that, data on quarterly producer prices is also lined up.

As for the US, CPI figures are due later on in the week and both headline and core readings are expected to show 0.2% gains. Stronger than expected data could support the odds of a Fed rate hike in September while weak readings could prompt traders to push back their expectations to December or early 2016.

Commodity trends could continue to dictate price action for this pair in the next few days, with a slight bias to the downside since gold and oil prices have been tumbling. However, the lower odds of a Fed rate hike due to the Chinese central bank’s efforts to devalue their currency might also keep the dollar’s gains limited.

By Kate Curtis from Trader’s Way