Top tier economic updates hit the wire for the Greenback, sending USD lower on the session. Will the bearishness continue, and will it be enough for NZD/USD to break a major resistance area?
Major Resistance Retest on NZD/USD
NZD/USD is on the move in the past few sessions, with the bulls benefitting from recent round of U.S. dollar weakness sparked by falling expectations of the Fed tightening monetary policy as growth/pandemic risks rise.
And today, that sentiment continued after a disappointing round of U.S. jobs updates; first from ADP’s private payrolls report and then a disappointing Employment index read from the latest ISM manufacturing PMI report (a 49.0 percent read in August indicates contraction). This sparked further USD selling, likely pricing in higher odds of a disappointing employment update from the U.S. government on Friday, as well as a more uncertain picture of when the Fed may taper bond-buying operations.
The question now is whether USD selling will continue to have legs from here, and if so, where to express that?
Well, NZD/USD is a pair to look at as we may see further strength in the Kiwi as New Zealand reduces its lockdown measures this week. New Zealand has been relatively successful at controlling the pandemic, and if that remains the case, the Kiwi could be a beneficiary of economic activity returning and growing.
That makes the current technical setup on NZD/USD one to watch this week, which is a basic resistance retest on the four hour chart above. If the pair does break higher above the 0.7050 – 0.7100 resistance area this week on a weak NFP report from the U.S., that could be the technical signal that draws in both short and longer-term traders into a bullish position.
We’ll be watching for that scenario to consider a long position, possibly on a “break-and-retest” pattern as a bullish reaction may draw in profit taking ahead of the weekend.
In the off chance that U.S. NFP gives us a big positive surprise, it’s highly likely USD could rally quickly, making the resistance area a high reward-to-risk swing setup if using a tight stop above 0.7100 and targeting the June/July lows around 0.6920.
What do you guys think? Will the resistance area turn NZD/USD lower once again? Or will the market break higher into a new momentum long move?
Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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