Volatility may be coming for the Kiwi with the latest jobs update coming from New Zealand very soon. NZD/USD seems to have one of the best setups for both the bulls and the bears to play the reaction.
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Fresh Market Headlines & Economic Data:
- US considers dropping some tariffs on China
- October ISM non-manufacturing index comes in at 54.7, vs 53.5 estimate
- U.S. Trade With China Tumbled in September After Fresh Tariffs
- The U.S. monthly international trade deficit decreased in September 2019 by -$52.5B
- Fed’s Barkin: Conflicting signals make U.S. economy hard to read
- Canada’s merchandise trade deficit with the world narrowed from $1.2 billion in August to $978 million in September.
- U.K. Service sector flatlines in October at 50.0
- OPEC chief says oil market may have upside potential in 2020
- The French government budget balance amounted to -€ 109.0B in Sept. 2019 versus -€ 87.1B at the end of Sept. 2018.
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- New Zealand Employment at 9:45 pm GMT
- Bank of Japan Monetary policy meeting minutes at 11:50 pm GMT
What to Watch: NZD/USD
Before we look at NZD/USD, just wanted to point out that we’ve started doing a Daily London Session Watch list, starting today with a look at GBP/JPY. For all you traders out there who trade the London session, be sure to check out the site daily for the latest news updates and pairs that could be on the move for the session!
Not a lot of potential catalysts coming up for the rest of the U.S. session or Asia session, but what we do have is likely to present a short-term opportunity in the New Zealand dollar. At the very start of the Asia trading session, we’ll get the quarterly employment update from New Zealand; it’s not only a top tier economic report but also the infrequency of its update (quarterly) makes it a high probability market mover as well. Expectations are for a tick higher in the unemployment rate to 4.1% and the overall employment growth rate is expected to slow to +0.2%, so the probability is that we may see a weaker Kiwi if the numbers do point to a slowing employment situation.
It looks like there’s potential opportunity for the bears, but we can’t ignore that this number can surprise traders like at the last update. So, we’ve gotta be open to both directional biases, which makes the setup on NZD/USD one to watch. On the one hour chart above of NZD/USD, we can see the pair just took a dip in the last few hours, mainly on broad U.S. dollar strength that may have been sparked by the improving sentiment on the U.S.-China trade story.
That trend may continue going into the Asia session and if the NZ employment update disappoints, the setup to watch out for is a break of the longer-term rising ‘lows’ pattern, which lines up with an end of October consolidation phase just above 0.6350. A break there could draw in momentum sellers, and given the daily ATR of around 50 pips, we could see a retest of 0.6300 soon after if that scenario plays out.
For NZD/USD bulls, a better-than-expected NZ employment update will likely pump up the Kiwi, making the rising ‘lows’ pattern one to watch out for a retest and bullish reversal. If not retested before the event, a break back above, retest, and hold of the 0.6400 could the signal to try to take some short-term pips. If that scenario plays out, targeting the intraweek high at Monday’s 0.6465 print seems to be reachable given the daily ATR of 50 pips mentioned above.