Coronavirus concerns continued to rock the markets today, which is why I’m setting my sights on a potential retracement on NZD/USD’s chart.
Fresh Market Headlines & Economic Data:
- NAB: Australia business conditions soft as confidence hits six-year low
- Prime Minister Jacinda Ardern reveals September 19 election date
- Death toll from Wuhan coronavirus tops 100 as infection rate accelerates
Upcoming Potential Catalysts on the Forex Calendar:
- Switzerland’s trade balance at 7:00 am GMT
- Spain’s unemployment rate at 8:00 am GMT
- U.K.’s CBI realized sales at 11:00 am GMT
- U.S. core durable goods orders at 1:30 pm GMT
What to Watch: NZD/USD
Reports of the death toll from the Wuhan coronavirus hitting the 100 mark against the 4,500 confirmed cases brought more bears to the markets’ yard today. And, with no major economic data on the docket, traders ran with the economic theme for most of the Asian session.
The prospect of reduced economic and travel activities in the Asian region hit the Australian and New Zealand dollars, with the former seeing deeper losses as an Australian consumer survey hit a six-month low.
Kiwi is not far behind in the losses category, however, which is why NZD/USD’s downtrend caught my attention. The pair found support just below .6540 and looks set for a retracement. Today’s U.S. durable goods report could also inspire some volatility in the next trading sessions.
The .6580 area is a good place to short if you’re betting on NZD/USD’s further losses after a retracement. The level lines up with a previous support, 50% Fib retracement, 100 SMA, and the top of a descending channel. The pair could also see retracements at .6560 mid-channel resistance or the 38.2% Fib near .6575 if NZD doesn’t find enough bullish momentum.
Meanwhile, the bulls can take advantage of the support around today’s lows and countertrend NZD/USD’s “retracement” until it finds fresh momentum. Countertrend trading isn’t for everyone but the reward-to-risk ratio is attractive if NZD/USD ends up back at the top of the channel.
Here’s MarketMilk’s volatility guide if you’re not sure on where you should put your stop losses: