EUR/NZD may be setting up for a break out as we head into top tier New Zealand data coming soon.
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on AUD/CHF after the RBA’s latest statement, so be sure to check that out to see if there is still a potential play!
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Fresh Market Headlines & Economic Data:
- U.S. factory orders increase 1.8% in December
- White House economic adviser does not see U.S. economic ‘disaster’ from coronavirus
- Coronavirus Cases top 20,000, Macao asks casinos to close
- UK Construction output falls at slowest pace since May 2019
- Unemployment rises in Spain in January
- Industrial producer prices stable in both euro area and EU27
- The Italian consumer price index increased by 0.2% on monthly basis and by 0.6% with respect to January 2019
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- API Crude Oil inventory at 9:30 pm GMT
- New Zealand Employment at 9:45 pm GMT
- Australia CommBank Services PMI at 10:00 pm GMT
- Japan Services PMI at 12:30 am GMT (Feb. 5)
- RBA Governor Lowe speech at 1:30 am GMT (Feb. 5)
- BOJ Wakatabe speech at 1:30 am GMT (Feb. 5)
- China Caixin Services PMI at 1:45 am GMT (Feb. 5)
What to Watch: EUR/NZD
The latest employment data from New Zealand is just right around the corner, and likely to spark quick moves for Kiwi traders to try to grab. We think EUR/NZD is the pair to watch for the event as its current price action opens up different opportunities and flexibility for whatever the outcome may be.
On the one hour chart above of EUR/NZD, we can see the market has been consolidating over the past couple of sessions after a strong run higher last week from around 1.6670 to topping out around 1.7175. If you’re neutral on the pair, this creates a consolidation breakout play if volatility picks up enough, so its best to wait for a breakout. But if you’re a more aggressive trader, setting up a straddle play outside of the consolidation area may be something to consider.
If you’re a bull on the pair, you’ll be rolling with the recent short-term trend higher, and if NZ employment disappoints then the setup to watch is for an upside breakout of the falling ‘highs’ pattern. If the reaction sparks a rally in Kiwi, then you may consider playing the recent uptrend in EUR/NZD at a better price (the next support area around 1.6950 -1.7000) if you start to see reversal patterns form.
If you’re a bear on the pair, a downside break of the minor support formed around 1.7070 is something to watch out for, and may even come before the event given the expectations of 0.3% growth q/q (vs. 0.2% q/q previous). If we do see a positive surprise, the move could be strong as it further solidifies the speculation of no RBNZ rate cuts this year. If that scenario plays out, a move to 1.6950 – 1.6900 would be within the daily ATR of around 100 pips.