Week Ahead in FX (November 21 – 25): RBNZ Decision, FOMC Minutes, and Global PMIs

Will we hear of a “pivot” from the RBNZ or the FOMC minutes this week?

And will the global PMI figures point to increased odds of a recession?

All that and more in this week’s top-tier lineup!

But ICYMI, I’ve written a quick recap of the market themes that pushed currency pairs around last week. Check it!

And now for the closely-watched potential market movers this week:

Major Economic Events:

RBNZ monetary policy statement (Nov. 23, 1:00 am GMT) – Is another 0.75% interest rate in the cards for New Zealand’s central bank? Or will they step on the brakes again this time?

Some expect the RBNZ to lift rates from 3.50% to 4.25% this week while others predict a pivot to just a 0.50% rate hike.

Policymakers already slowed down their pace of tightening in the previous meeting, but the latest round of inflation figures warranted more aggressive moves.

Still, RBNZ officials remain wary of housing market risks and continued global downside risks. Better keep your eyes and ears peeled for policy clues in their presser as well!

Global PMI surveys (Nov. 23) – It’s the third week of the month, which means it’s time for another round of flash PMI readings.

In the eurozone, the two biggest nations are mostly expected to report sharper slowdowns in their business sectors, with the exception of Germany’s manufacturing sector. The German manufacturing PMI is slated to tick higher from 45.1 to 45.3 in November, reflecting a slower pace of contraction.

Meanwhile, the U.K. is expected to report a faster pace of contraction in both industries. The U.K. manufacturing PMI is estimated to dip from 46.2 to 45.7 while the services PMI could fall from 48.6 to 48.0.

Mixed results are in the cards for Uncle Sam, as the manufacturing PMI could fall from 50.4 to 50.0 while the services figure could improve from 47.8 to 48.0.

FOMC meeting minutes (Nov. 23, 7:00 pm GMT) – Rounding up a busy Wednesday for the week would be the release of the transcript of the latest FOMC pow-wow.

The minutes could contain slightly cautious views from policymakers, but it’s worth noting that this meeting took place prior to the release of the latest upside inflation surprises.

Expect additional volatility around the release of this report since it’s scheduled just before U.S. traders take off for the Thanksgiving holidays.

Forex Setup of the Week: EUR/NZD

With the RBNZ decision likely to be the main event for the week, I’m looking at this bounce-or-break scenario on a Kiwi pair.

EUR/NZD has formed lower highs and found support around the 1.6750 minor psychological mark, creating a descending triangle on its hourly chart.

The pair is currently testing support and might be due for a move back to the resistance around 1.6950-1.7000 next.

However, technical indicators are giving off bearish vibes, as the 100 SMA is below the 200 SMA while Stochastic is pointing down.

A break below the triangle support could set off a drop that’s the same height as the chart pattern or roughly 450 pips, especially if the RBNZ signals scope for more interest rate hikes.

Just brace yourselves for additional volatility when trading the news!