NZDUSD has been trading inside a long-term rising channel visible on its daily chart. Price is currently testing the resistance and might be due for a selloff towards support.

Stochastic is indicating overbought conditions so buyers might need to take a break and let sellers take over from here. If so, the pair could drop towards the bottom of the range at .6750 or at least until the mid-channel area of interest at .6900. RSI is also showing overbought conditions and is turning lower to indicate a return in selling pressure.

Meanwhile, the 100 SMA is still above the 200 SMA, which means that the path of least resistance is to the upside and that buying momentum could resume at some point. In addition, these moving averages line up with the bottom of the channel and might hold as dynamic support if it’s tested.

The main event risk for this trade might be the FOMC statement, as the Fed is set to announce their revised growth and inflation forecasts. No actual interest rate hikes are expected for now but any hawkish remarks could renew speculations for tightening in July, thereby driving dollar demand.

New Zealand is set to print its quarterly GDP report mid-week and might show a 0.5% growth figure, slower than the previous 0.9% expansion. Still, stronger than expected results might drive the Kiwi past the channel resistance and on a sharper climb.

The GDT auction is also scheduled on Wednesday and another gain in dairy prices could be enough to assure market watchers that the industry is already recovering. Other factors that could bring volatility are the US retail sales reports tomorrow and US CPI due on Thursday.