Looks like NZD/USD is still stuck at its mid-channel area of interest and the upcoming NFP release could help the pair decide where to go. Here’s what I’m looking at.
NZD/USD Trade Idea
Price is safely inside its ascending channel formation visible on the daily time frame, but it is currently hitting a ceiling at the middle of the channel near the .7300 major psychological resistance. The path of least resistance is to the upside since the long-term uptrend is very much intact, but stochastic is indicating overbought conditions so a selloff might be due.
I’ve got a bullish bias on the Kiwi since New Zealand’s economic reports have been improving steadily and the RBNZ has expressed its intention to keep rates on hold for the foreseeable future. However, a stronger than expected U.S. jobs report could allow the Greenback to recover from its recent slide and push NZD/USD to the channel support around .7100. As Forex Gump noted in his NFP Preview, jobs figures from other agencies have been hinting at a potential upside surprise.
Then again, I also can’t help but think that market expectations for the U.S. jobs report are already running high so the chance for disappointment is also way up there. Analysts are expecting to see a 170K increase in employment but seem to be secretly crossing their fingers for a reading above 200K so anything below that would fail to impress.
Besides, the FOMC didn’t sound all that hawkish in their latest policy statement, leading many to doubt that three rate hikes could be possible this year. After all, they’ve got the Donald to worry about and his recent actions risk putting U.S. trade and foreign relations in jeopardy.
As you’ve probably guessed, I’m looking for a chance to buy this pair either on a dip to the channel support or on a break past the .7300 mark. I’ve got my sights set on the channel resistance at .7500 but I’ll probably wait for the dust to settle after the NFP release before hopping in. Don’t forget to check out our risk disclosure if you’re trading this one, too!
See also: Q4 2016 Trading Performance Review
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