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Risk aversion seems to be extending its stay in the markets as geopolitical tensions returned to the spotlight. What do you think of this short-term risk-off play on NZD/USD?

NZD/USD Trade Idea

In my Comdoll Trading Kit this week, I showed y’all how this pair has been trading inside a descending channel formation since the third week of March. Price bounced off the bottom at the .6950 area and could be due for a test of resistance near the .7000 major psychological level.

I’m seeing a support-turned-resistance area around the top of the channel, but I also can’t help but worry that the middle is already holding as near-term resistance and could be enough to keep gains in check. However, stochastic is approaching the oversold region so there could be a chance for Kiwi bulls to charge.

NZD/USD 1-hour Forex Chart
NZD/USD 1-hour Forex Chart

The NFP report is up for release in today’s New York trading session so I’m counting on additional volatility to kick in for the dollar pairs. Because of that, I haven’t set any actual entry orders yet and I’ll be sitting on my hands until I see the results.

Leading jobs indicators have been mixed, with the ADP non-farm employment change printing stronger than expected figures for March and seeing an upgrade in February data. On the flip side, the Challenger job cuts report showed a 17% monthly increase in layoffs while the jobs component of the ISM non-manufacturing PMI dropped in March.

I’m also trying to keep tabs on geopolitical headlines these days as risk sentiment seems to have been affected by news on the metro attack in Russia, the chemical bomb in Syria, and missile launches in North Korea. If investors continue to feel jittery, higher-yielding currencies like the Kiwi could keep losing ground against safe-havens like the U.S. dollar.

For now, I’m eyeing a potential short around the .7000 handle with a 100-pip stop and target for a simple 1:1 play. I’ll keep y’all posted if I do hop in, and don’t forget to check out our risk disclosure if you’re trading this one, too!

Cheers,

Happy

See also: Q4 2016 Trading Performance Review

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.